The Education and Training of Industrial Manpowerin Japan

Ken Inoue SWP729

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WORLD BANK STAFF WORKING PAPERSNumber 729 XNTERNATfONA1 MOIETA-y FUy D

JOlNr LIBFijAy

JUN 25) 1985BATI FOR

ECIsST2iiCTIO~N t;tr' EEVPOPMENT

The Education and Training of Industrial Manpowerin Japan

Ken Inoue

The World BankWashington, D.C., U.S.A.

Copyright (© 1985The International Bank for Reconstructionand Development/THE WORLD BANK1818 H Street, N.W.Washington, D.C. 20433, U.S.A.

All rights reservedManufactured in the United States of AmericaFirst printing April 1985

This is a working document published informally by the World Bank. To present theresults of research with the least possible delay, the typescript has not been preparedin accordance with the procedures appropriate to formal printed texts, and the WorldBank accepts no responsibility for errors. The publication is supplied at a token chargeto defray part of the cost of manufacture and distribution.

The World Bank does not accept responsibility for the views expressed herein, whichare those of the authors and should not be attributed to the World Bank or to itsaffiliated organizations. The findings, interpretations, and conclusions are the resultsof research supported by the Bank; they do not necessarily represent official policy ofthe Bank. The designations employed, the presentation of material, and any maps usedin this document are solely for the convenience of the reader and do not imply theexpression of any opinion whatsoever on the part of the World Bank or its affiliatesconcerning the legal status of any country, territory, city, area, or of its authorities, orconcerning the delimitation of its boundaries, or national affiliation.

The full range of World Bank publications, both free and for sale, is described in theCatalog of Publications; the continuing research program is outlined in Abstracts ofCurrent Studies. Both booklets are updated annually; the most recent edition of each isavailable without charge from the Publications Sales Unit, Department T, The WorldBank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from the EuropeanOffice of the Bank, 66 avenue d'1ena, 75116 Paris, France.

Ken Inoue, on the staff of the University of Sussex (England), is a consultant to theEast Asia and Pacific Regional Office of the World Bank.

Library of Congress Cataloging in Publication Data

Inoue, Ken, 1957-The education and training of industrial manpower

in Japan.

(World Bank staff working papers ; no. 729)Bibliography: p.Includes index.1. Employees, Training of--Japan. 2. Technical

education--Japan. 3. Manpower policy--Japan.4. Industry and education--Japan. 5. Education andstate--Japan. I. Title. II. Series.HF5549.5.T714576 1985 331.25'92'0952 85-6264ISBN 0-8213-0552-2

Abstract

This paper examines the role that education and training have played

in Japan's transformation from a preindustrial agrarian society in the

late 19th century to one of the leading industrial nations some 100 years

later. It provides as well some lessons for developing countries.

The first part of the paper discusses the establishment by the

Meiji government (1868-1912) of a new school system to train the manpower

needed to create a modern Japan. The Meiji government concentrated first

on developing higher education to provide the leaders required for Japan's

process of modernization. Expatriates played an, important role in the

development of the higher education subsector. The government also

recognized the need to provide universal primary education and was able

to achieve this by the end of the Meiji period. Much of the financial

burden of primary education was transferred from the central government

to local governments, which were also given a high degree of autonomy.

The emphasis on higher and primary education resulted in severe shortages

of skilled middle-level manpower needed for industrialization. To

address this problem, the government issued the Ordinance on Industrial

Schools in 1899, which sought to develop industrial education and training

at the secondary level.

The development of the education system during the Meiji period

was essentially a process of trial and error. After the Second World War,

Japan developed a new educational system comprising six years of primary

education, three years of lower and three years of upper secondary school,

and four years of university. The system has developed rapidly: enrollment

rates at the primary and lower secondary level are at present almost

100 percent and at the upper secondary level, 94 percent. Education plays a

large role in Japanese society, which has been described as an "academic

qualification society." Academic qualifications determine an individual's

salary, promotion, and social status, and therefore competition for places

in the top schools is fierce. There is an overall bias toward general

education rather than learning specific skills. The reason for this is

that in a time of rapid technological change a strong background of

general knowledge is more useful than specific vocational skills that may

soon become obsolete.

The role of companies in the upgrading and utilization of manpower

is considered in the second part of the paper. The government gives

strong support to the education and training system in Japanese companies

through financial assistance and incentives. The system covers almost

all levels of employees in a company. Moreover, under the Japanese life-

time employment system, employees receive education and training at each

stage of their career until they retire. Japanese workers are also

encouraged to play an active role in their companies; the idea of quality

control circles has contributed to higher levels of quality and greater

participation by employees. Aspects of the Japanese style of management are

considered, including the lifetime employment system that results in low

levels of unemployment and relatively stable labor-management relations.

In its summary, the paper considers several aspects of Japan's

development experience and suggests lessons that developing countries

could draw from this experience.

Table of Contents

Page No.

CHAPTER I INTRODUCTION ......................... . . 1.. .. .............

CHAPTER II THE ROLE OF SCHOOLS AND TRAINING INSTITUTES INTHE FORMATION OF MANPOWERA N P OR........ 2

1. The Acquisition of Skills for Industrialization in theMeiji Period.. 2

(a) Higher level specialized education and training. 2(b) Primary level general education. 3(c) Secondary level industrial education and training. 6

2. System for Acquiring Skills for High Economic Growthin the Post-War Period. 8

(a) The program administered by the Ministry of Education. 9(b) The program administered by the Ministry of Labor ............ 19

3. Academic Qualification Society and Economic Development . . 23

CHAPTER III THE ROLE OF COMPANIES IN THE UPGRADING ANDUTILIZATION OF MANPOWER ......... . ................ 30

1. Education and Training in a Company ....... ........................ 30

(a) Government policies for skill acquisition in acompany .... . 30

(b) Education and training system in Japanese companies .......... 33

2. Japanese Management and Manpower . ..... 41

(a) The employment and promotion system...*........................ 41(b) The wage system ................... 44

3. Workers' Participation and Economic Development ........... ......... 47

(a) Labor participation in management ............................ 48(b) Suggestion system .. .. ............... ... 49

(c) Company-wide quality control ................................ . 51

Some Effects of Japanese Management Policies ..................... . 53

CHAPTER IV CONCLUSION ......................... .... 56

Lessons from Japan's experience.****.. ..... ....................... 56

List of Tables

II-1 Rates of attendance at primary school in the Meijiperiod . ...................................................... 5

II-2 Shares of Tokyo University and primary schools in thetotal national expenditure for education .................... . 6

II-3 Rates of public expenditure for education ..................... . 6II-4 Industrial supplementary schools .............................. 7II-5 Industrial schools ............................................. 8II-6 Number of schools, students and rates of enrollment ....... .... 10II-7 Standard number of yearly teaching hours ....................... 11II-8 Upper secondary schools . ................................ . 12II-9 Percentage of upper secondary school leavers'

occupation ....... .............. .......... 13II-10 Relation between occupation and subjects at upper

secondary school .......... .... . .. ....................... 13II-11 Comparison of teaching hours between technical

college and upper secondary school and university ............ 14II-12 Number of university students classified by

specialization ................. ......... . 15II-13 Percentage of graduates' occupation classified by

specialization ......... 16II-14 Special training schols h 17II-15 School expenditure classified by type of school . .18II-16 School expenditure in 1978 classified by defrayer 19II-17 Vocational training institutions and training courses. 20II-18 Number of vocational training institutions and

students in 1989....81. ............. 21II-19 National and local budget for vocational training 23II-20 Wage differentials classified by academic

qualification in 19829...92............................... 24II-21 Rates of return in Japanese education ............. . 25II-22 University nomination system y * .26

II-23 Wage differential index by size of company 26II-24 Rates of attendance at upper secondary school and the

shares of general and vocational courses 27II-25 Students' preference for their coursese o e 28II-26 Rates of utilization of basic training places ........ 28

III-1 Distribution of labor forces and GDP.............O........ ... 30III-2 Authorized in-company vocational training institutions......... 33III-3 Share of the number of large companies and small and

medium comane m.....n ie...s...O 34III-4 Shares of manufacturing companies classified by size........... 35III-5 Education and training performance in manufacturing

cmpanies..*.*m........a ni.....e...g.................. 35III-6 Index of expenditure per worker for education and

training****n...........................0.0....... .000*... 36III-7 Methods of self-development for the management................. 37III-8 Methods of education and training for employeesl..... e...s.00. 37III-9 Composition of wagesa.g.... *.* .............. ............ 44

III-10 Types of basic salary .............. 45III-l1 Percentages of companies adopting a system of yearly

salary increase .............................................. 46III-12 Wage differentiaLs classified by age and academic

qualification ................................................ 47III-13 Number of unions and their members .. . 48III-14 Suggestion system ........ 50III-15 Trends of the suggestion system. .. 51III-16 Registered number of QC circles.. 53III-17 Rates of unemployment in selected OECD countries ............... 54III-18 Index of workdays lost in labor disputes . . . 54III-19 Comparison of quality between Japanese and American

semiconductors .... . . . 55III-20 Income distribution . . . 56

List of Diagrams

II-1 School system in 1873 .......................................... 4II-2 Present school system ........................................ . . 9III-1 In-company education and training system of

Nippon Steel Corporation. .. . . ................... 39

III-2 Internal accumulation type and external procurement type ....... 43

Acknowledgements

The author wishes to thank Mrs. S. Asher and Mr. G. Hunting for

their assistance in reviewing the paper and providing helpful comments

on it, and Mrs. C. Bayulken for editing and compiling the paper.

CHAPTER I

INTRODUCTION

The three basic resources necessary for economic development arefinancial resources (money), physical resources (material) and human resources(manpower). Although all three are closely related and mutually dependent inthe process of economic development, manpower appears to be the most funda-mental resource. A country with rich natural resources and ample financialresources cannot necessarily achieve steady economic development if it doesnot have enough manpower to utilize and develop them. On the other hand, acountry with well educated manpower has a chance to obtain economic success,even if it has poor natural resources.

Human resources have played a crucial role in Japan's economicdevelopment. The Government has always been strongly concerned about thenation's education, and by the end of the Meiji period Japan had achievedalmost universal compulsory education. Today, the rate of attendance at uppersecondary schools is 94% and that at university 32%. In regard to skillacquisition, various types of institutions such as upper secondary schoolsoffering vocational courses, technical colleges, special training schools,vocational training schools and junior vocational training colleges areprovided. However, people seem to prefer general education to vocational.This is because the Japanese educational system works as a sophisticatedmechanism to select students, and companies recruit new graduates based ontheir academic qualification rather than their vocational knowledge andskills.

After hiring new graduates, Japanese companies provide long andsystematic education and training for all employees including blue-collarworkers in order to develop their potential capability, although there aresome differences between large companies and small and medium companies. Theselong and systematic education and training programs are based on the so-calledJapanese style of management such as life-time employment and seniority wagesystem. Another remarkable characteristic of Japanese manpower is workers'participation in management and production. Human oriented activities such asquality control (QC) circles play an important role in Japanese economicdevelopment.

The main purpose of this paper is to examine the formation andutilization of manpower for economic development in Japan, and to considersome lessons for developing countries from Japan's experience. The paperconsists of two main chapters. Chapter II considers the role of schools andtraining institutes in the formation of manpower and examines the educationand training system both in the Meiji period and in the post-World War IIperiod. Chapter III deals with the role of companies in the upgrading andutilization of manpower. Education and training in a company, Japanesemanagement and manpower, and workers' participation are the main topics ofthis chapter. The final chapter describes the lessons which developingcountries can learn from Japan's experience.

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CHAPTER II

THE ROLE OF SCHOOLS AND TRAINING INSTITUTESIN THE FORMATION OF MANPOWER

1. The Acquisition of Skills for Industrialization in the Meiji Period

This section examines the Japanese education and training system,especially as regards the acquisition of skills for industrialization in theMeiji period. During this time Japan started her modernization process andtransformed herself from a pre-industrial agrarian society to a modernindustrial nation.

The Meiji period was a time of trial and error for modernization.In the field of education and training, too, many kinds of schools andtraining institutes were established based on different policies. However,roughly speaking, we can distinguish three types of education and trainingsystems in this period, namely: (a) higher level specialized education andtraining for the selected elite; (b) primary level general education foreverybody; and (c) secondary level industrial education and training for thosenot included in the elite category. In the following section, we will examinethe development of these three systems in this order.

(a) Higher level specialized education and training

The first concern of the Meiji Government was for higher educationrather than primary or secondary education. One of the characteristics of theGovernment's educational policies was that, in producing manpower forindustrialization, they started with top level engineers, and only laterfocussed on middle and lower level engineers. This was mainly because theMeiji Government tried to quickly foster limited elites to be leaders ofJapan's modernization. It should also be noted that, in the early Meijiperiod, each ministry had its owy, school or training institute to produce thenecessary manpower in its field_ In 1878, for example, there were thefollowing schools for higher education and training under the management ofdifferent ministries.

Ministry of Education - University of TokyoMinistry of Engineering - College of EngineeringMinistry of Home Affairs - Komaba Agricultural SchoolMinistry of Justice - School of LawBoard of Cultivation - Sappro Agricultural School

KOBU DAIGAKKO (Ministry's College of Engineering) played the mostimportant role in producing high level skilled manpower. The 2/ollege wasestablished by a young British engineer, Henry Dyer, in 1873., When heplanned the College, he did not directly transfer the European model to Japanbut built his own unique system of engineering education, which combinedtheoretical study in a school and practical training in a factory. He divideda six-year course into three terms. In the first two years, students learnedbasic theory in a school, in the next two years they took both specializedsubjects in a school and on-the-job training in the ministry's factories, andin the final two years they concentrated on on-the-job training. The College

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was highly successful anl the level of education was outstanding even by worldstandards at that time.3 Graduates from the College had to work in theMinistry of Engineering for seven years and piayed a crucial role in Japaneseindustrialization and technological deveLopment. After producing 211graduates, the College was absorbed into Tokyo University and became theDepartment of Engineering in 1886. The jurisdiction of most of the otherministries' schools was also gradually transferred to the Ministry ofEducation.

It is important to pay attention to the role of the thousands offoreign experts and teachers,such as Dyer, who were employed by the MeijiGovernment. For example, the Ministry of Engineering employed 588 foreignexperts until it was abolished in 1X05, and all staff in the College ofEngineering were British educators.- The cost of employing them, however,was very high. The Meiji Government spent 4% of the total budget for salarypayments to them in the period from 1868 to 1872, 2% from 1873 to 1877, and 1%from 1878 to 1882. In the case gf the Ministry of Engineering the paymentreached 58% of the total budget._

Another important education and training institute for industrial-ization was TOKYO SHOKKO GAKKO (Tokyo Craftsmen's School, the present TokyoInstitute of Technology), which was established in 1881. The original purposeof the school was to produce middle-level skilled manpower such as chiefcraftsmen or instructors for other craftsmen's schools by giving vocationaltraining to poor students. The school had a four year course; one year forbasic subjects and three years for specialized subjects. However, since mostof the common people did not understand why craftsmen should go to school,more than 70% of the students came from the samurai class and became the sametype of industrial elite as the graduates from the College of Engineering.

Although the development of Japanese industry required a greatnumber of skilled workers, graduates from the Ministry's College of Engineer-ing and the Tokyo Craftsmen's School were limited, and they became managers oradministrators of industries rather than workers. As a result, a shortage ofmiddle-level skilled manpower emerged as a serious problem for Japaneseindustrialization in the 1890s.

Before looking at this problem, we will first examine the primaryeducation system.

(b) Primary level general education

Although primary education is not directly related to occupation orskill acquisition, it played a crucial role in Japanese development in thefollowing two senses. First, it realized almost universal literacy andnumeracy by the end of the Meiji period. Second, in primary school pupilslearned the attitude and ethics necessary to be modern workers. In short,primary education provided the basis of modern manpower for Japaneseindustrialization.

A Ministry of Education was organized in 1871 to make a nationwideplan of education, and GAKUSEI (The Fundamental Code of Education, orliterally "School System") was regulated the following year. The Code was thefirst national plan for a universal education system in Japan. Diagram II-1shows the school system regulated by the Code. According to the Code, the

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Diagram II-1: School System in 1873

* I : I- ----------- II :|I Secondary Schooll

I (Lower):(Upper) Ig : | : |~~~~~~~~ Univ.

I Primary School S1 eco.Sch. by forei- In teacher| : | Medical Sch. Iby foreignI : | teacherI : Ifore-I physics.medicine I(Lower) : (Upper) I ign I industrv.law.minling

Ilang.1 commerce.agriicultureI : [Sch. lUpper I-

I INormall Sch._____ I :I XPeople's SchoolI : . I I(xirl) (boy)

Kinder I I _

garten I I Sch. of commerce,industryI I aRriculture.interpreter

(grade)l 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23(age)

entire country was divided into eight university blocks, each university blockinto 32 secondary school blocks, and each secondary school block into 210primary school blocks. In this way a total of eight universities, 256secondary schools and 53,760 primary schools were to be built. Howev r, thiswas only a desk plan and most of the schools did not actually exist.67 Themain purpose of the Code was to provide a universal primary school system, andto encourage people nationwide to learn in school. The famous preamble of theCode states:

It is only by building up his character, developing his mind, andcultivating his talents that man may make his way in the world, employhis wealth wisely, make his business prosper, and thus attain the goal oflife. But man cannot build up his character, develop his mind, orcultivate his talents without education - that is the reason for theestablishment of schools...Learning is the key to success in life, and noman can afford to neglect it....Learning has been viewed as the exclusiveprivilege of the samurai and his superiors, farmers, artisans, merchants,and women have neglected it altogether and do not even know itsmeaning...This was due to our evil traditions and, in turn, checked thespread of culture, hampered the development of talent and accomplish-ments, and sowed the seeds of poverty, bankruptcy, and disrupted homes.Every man should therefore pursue learning; and in so doing he should notmisconstrue its purpose. Accordingly, the Department of Education will

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soon establish an educational system and will revise the regulationsrelating thereto from time to time; wherefore there shall, in the future,be no community with an illiterate family, nor a family with anilliterate member. Every guardian, acting in accordance with this, shallbring up h's children with tender care, never failing to have them attendschool...-

From this preamble we can observe three basic ideas of the MeijiGovernment about primary education. First, the Government grasped the meaningof education from a practical and utilitarian point of view. They repeated topeople that learning is the key to success in life. This is because theGovernment believed that learning was also the key to economic success inJapan. Learning, here, means acquiring western knowledge and skills formodernization, and primary education was regarded as a basic tool to achievethis purpose. Second, the Code is based on an egalitarian idea ofeducation. It is remarkable that immediately after feudalism Japan had anegalitarian educational system, in which the former so-called four differentsocial classes (samurai, frmers, artisans, and merchants) attended the sameclass in the same school.8 Third, the Code started the first compulsoryeducation in Japan. The Code tried to spread primary education by means ofregulating several kinds of primary school such as girls school, villageschool, poor people's school, etc. as well as ordinary primary school, whichhad four years lower course and four years upper course. Table II-1 shows therates of attendance at primary school in the Meiji period. Even compared withwestern countries at that time, 35% in 1875 was a high rate. At the end ofthe Meiji period it was close to 100%.

Table II-1. RATES OF ATTENDANCE AT PRIMARY SCHOOL

Year Male Female Total

1875 51 19 351885 66 32 501895 77 44 611905 98 93 961915 99 98 99

Source: National Institute for Educational Research, 1977.

The biggest obstacle to the implementation of the Code wasfinance. A great part of the national budget for education had to be spentfor Tokyo University and sending students abroad. In the first budget of1873, for example, Y 100,000 out of Y 800,000 was earmarked for overseasstudy. Y 300,000 was spent in 1873 for 1,260,0009pupils in 14,000 primaryschools, but this subsidy was abolished in 1881._' Table II-2 shows thecomparison of expenditure between Tokyo University and primary education.

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Table II-2. SHARES OF TOKYO UNIVERSITY AND PRIMARY SCHOOLS INTHE TOTAL NATIONAL EXPENDITURE FOR EDUCATION

Tokyo PrimaryYear University Schools

__________ % - ---------

1879 32 331880 40 181881 43 abolished

Source: Passin, 1965, p. 74.

Because the national budget could not afford the necessary expenditure fornationwide primary education, local governments and people had to provide mostof it. Table II-3 shows the national and local share of educational expend-iture. As shown in the table, almost 90% of public expenditure for educationwas provided by local governments in the Meiji period. As Passin commented,"this undoubtedly had many advantages: It assumed a closer correspondencebetween public demand and availability of school facilities than otherwisewould have prevailed; and it corresponded with her administrative traditiongand with the new administrative structure developed by the modern regime." -2

Table II-3. RATES OF PUBLIC EXPENDITURE FOR EDUCATION

National Local ShareYear share Total prefectural municipal

_________________ % - --- -- ------ -- - -- -

1881 10 90 14 761885 10 91 11 791890 10 90 12 781900 14 86 22 641910 11 89 19 71

Source: Passin, 1965, p. 70.

(c) Secondary level industrial education and training

As presented in the previous sections, the Meiji Government began toestablish an education and training system first at the higher specialized

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level and then at the primary general level. Although a secondary schoolsystem had also been provided, it was only for a limited elite who were goingto higher school, and curriculum in the school was mainly for general ratherthan vocational education. Therefore, as the Japanese economy developed,industrial education and training to produce middle level skilled manpower wasrecognized as vital for Japanese industrialization. In the early 1890s, justbefore the Japanese industrial revolution, the Meiji Government institution-alized two types of secondary level vocational schools, that is, JITSUGYOHOSYU GAKKO (Industrial Supplementary Schools) and TOTEI GAKKO (ApprenticeSchools), and enacted the National Treasury Subsidy Law for VocationalEducation Expenses to give financial support to these schools.

The industrial supplementary schools, which were institutionalizedin 1893, were defined as "places where necessary knowledge and skills aretaught as a supplement to primary school education to pupils who will work invarious industries" (Regulation of the School, Article 1). The schoolsaccepted mainly primary school leavers and gave them industrial education andtraining for three years. Subjects included a moral course, reading, writing,arithmetic and other subjects related to their occupation. The schools aimedat producing semiskilled manpower for various industries. As shown in TableII-4, the number of schools steadily increased until they were converted intoyouth schools in 1935.

The apprentice schools, which were institutionalized in 1894, weredefined as "places where necessary subjects for craftsmen are taught"(Regulation of the School, Article 1). The schools aimed at giving systematicvocational education and training in a school, instead of apprenticeship in afactory. The schools, however, failed to develop as training institutes andwere abolished in 1920. Kimura mentioned three reasons why the schoolsfailed. First, 144 schools out of a total of 238 apprentice schools werewomen's schools, and their programs contained little technical education forindustrialization. Second, most of the schools which tried to modernizetraditional local industry failed to attract students, who were interested inmodern technical engineering. Third, although the schools were expected tocombine theory and practic qf industrial education and training, this taskproved too heavy for them.-

Table II-4. INDUSTRIAL SUPPLEMENTARY SCHOOLS

No. of No. of No. ofYear schools teachers students

1894 19 26 1,1171895 55 71 3,3271905 2,746 1,272 121,5021915 8,908 2,815 498,1781925 15,316 9,821 1,051,4371935 16,678 68,179 1,902,157

Source: National Institute for Educational Research, 1977.

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The Ordinance of Industrial Schools, which is one of the mostimportant laws on industrial education and training in the Meiji period, wasenacted in 1899. The purpose of the Ordinance was to develop industrialeducation and training at the secondary level in order to meet the demand formiddle level skilled workers as a result of the Japanese industrial revolutionafter the Sino - Japan War (1894-1895). The Ordinance classified five basicindustrial schools, that is, Engineering School, Agricultural School,Commercial School, Mercantile Marine School, and Industrial SupplementarySchool. The Apprentice School was regarded as a kind of Engineering School.Table II-5 shows the development of industrial schools, excluding theindustrial supplementary schools.

Table II-5. INDUSTRIAL SCHOOLS

No. of No. of No. ofYear schools teachers students

1875 1 1 151885 26 102 9901895 54 397 5,0151905 270 2,633 29,9591915 547 4,962 50,3151925 797 10,643 50,315

Source: National Institute for Educational Research, 1977.

2. System for Acquiring Skills for High Economic Growthin the Post-War Period

Japan's rapid reconstruction after the Second World War andsubsequent high rate of economic growth are often regarded as a "miracle".Japan's average growth rate of GDP was 10.4% between 1960 and 1970, and 4.6%between 1970 and 1982, these figures are the highest among the advancedindustrial market economies. Japan's share of GNP in the world, except theUSSR, has increased from only 2.9% ($44 billion 12 n 1960 to 11.1% ($1.1 tril-lion) in 1980, which is second only to the USA.- Education and traininghave played an important role in this remarkable economic growth. The WorldDevelopment Report 1980, for example, says:

The outstanding growth of Japan ... probably could not havebeen achieved without their distinctively early mass literacyand numeracy, which (together with land reform, more advancededucation and good economic management) contributed toincreased agricultural productivity, to the expansion oflabor-intensive manufacturing and exports, and to theirremarkable ability to adapt to changes in technology andworld demand. (pp. 37, 39).

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The purpose of this section is to examine the kind of education andtraining system, especially for the acquisition of skills, that has beenprovided for this high economic growth. Although education and training incontemporary Japan are conducted by thousands of schools and traininginstitutions, we will divide them into two categories: (a) the programadministered by the Ministry of Education; and (b) the program administered bythe Ministry of Labor. This is not a distinction between general educationand vocational training, since the former includes both general and vocationaleducation, while the latter is mainly concerned with vocational training.

(a) The program administered by the Ministry of Education

After the Second World War, Japan developed a completely neweducational system. Diagram II-2 shows the present school system administeredby the Ministry of Education, and Table II-6 shows the number of schools,their students, and the rates of enrollment.

Diagram II-2: Present School System

I I I TechnicalI .I| I College I_ I [ I(part time)l

I I I I(correspondIence)

l I Primary I Lower I Upper II I I Secon-I Secon-I

-- *gI School I dary I daryl UniversitylKinder I I School I SchoollIgartenI I I I Junior I

I I I I CollIegeI I I I I Spe.Trla.Sch.t ___ I I I1 I Misce.jSch.

l __ I I I SpeciallTraining School_ I I Miscellaneous School_ _ _ I _ _ _ _ _ _ _ _ I _ _ _ _ I

I Schooll for the handilcapped I I

(grade) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20-21 22 23(age)

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Table II-6. NUMBER OF SCHOOLS, STUDENTS AND RATES OF ENROLLMENT(as of May 1983)

Classification Total National Local Private

Kindergarten 15,189 48 6,226 8,915Primary school 25,045 73 24,804 168Lower secondary school 10,945 77 10,314 559Upper secondary school 5,369 17 4,081 1,271Technical college 62 54 4 4Junior college 532 36 51 445University 457 95 34 328

(graduate school) (268) (82) (22) (164)Special Training School 2,860 185 160 2,515Miscellaneous school 4,674 9 135 4,530Schools for the handicapped 895 45 833 17

Total 66,028 639 46,642 18,752

Unit: thousand (Z)Classification Total (rate) Male (rate) Female (rate)

Kindergarten 2,193 (63.8) 1,119 1,074Primary school 11,739 (99.9) 6,014 5,726Lower secondary

school 5,707 (99.9) 2,925 2,782Upper secondary

school 4,716 (94.0) 2,375 (92.8) 2,341 (95.2)Technical college 47 46 1Junior college 379 38 341University 1,834 (35.1) 1,419 (37.4) 415 (32.2)(graduate school) (62) (4.9) (54) (5.8) (8) (2.1)

Special TrainingSchool 512 203 309

Miscellaneous school 606 311 295Schools for thehandicapped 94 58 36

Total 27,827 14,508 13,320

Note: The figures for upper secondary school include technical colleges.The figures for university include junior college, and also studentswho do not go to university or junior college immediately from uppersecondary school.

Source: Ministry of Education, 1984.

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As shown in the diagram, at present Japan has a so-called 6-3-3-4system (six years for primary school, three years for lower secondary school,three years for upper secondary school, and four years for university). Thefirst nine years of education are compulsory. Upper secondary school isdivided into a general course and a vocational course. The 12 years ofgeneral education in primary school, and lower and upper secondary school, andthe four years of higher level specialized education in university areregarded as the "main stream" of education. With regard to vocationaleducation and training, however, other types of schools such as vocationalcourses in upper secondary schools, technical colleges, special trainingschools, and miscellaneous schools also play a very important role. In thefollowing section, we will briefly examine each of these schools from theviewpoint of skill acquisition.

Primary and Lower Secondary Schools (SHOGAKKO and CHUGAKKO)

As mentioned above, at present Japan has nine years of compulsoryeducation at primary and lower secondary level, and enrollment rates arealmost 100%. Table II-7 shows the standard number of yearly teaching hours atprimary and lower secondary school. More than 60% of teaching hours are spenton general subjects such as "Japanese language", "social studies","arithmetic" and "science" (and "English language" in lower secondary school).

Table II-7. STANDARD NUMBER OF YEARLY TEACHING HOURS

Primary School Lower Secondary SchoolClassification (six years) (three years)

(Z) (X)

Japanese language 1,532 (26.5) 455 (14.4)Social studies 558 (9.6) 385 (12.2)Arithmetic/Math. 1,011 (17.5) 385 (12.2)Science 558 (9.6) 350 (11.1)Music 418 (7.2) 175 (5.6)Drawing and handicrafts 418 (7.2) -Arts - 175 (5.6)Homemaking 140 (2.4) -Industrial arts andhomemaking - - 245 (7.8)

Physical education(and health) 627 (10.8) 315 (10.0)

Moral education 209 (3.6) 105 (3.3)Special activities 314 (5.4) 210 (6.7)Elective subjects, etc. - - 350 (11.1)

Total 5,785 (100) 3,150 (100)

Source: Ministry of Education, 1981, p. 22

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In regard to education related to skill acquisition, "drawing and handicraft"and "homemaking" in primary school, and "industrial arts and homemaking" inlower secondary school should be mentioned, although they account for lessthan 10% of all teaching hours. These subjects aim to give pupils basicskills to enIji7e them to carry out planning, manufacturing, and maintenanceactivities."

Upper Secondary Schools (KOTOCAKKO or KOKO)

Although upper secondary school is not compulsory, the rate ofenrollment has already reached 94% (Table II-6). The courses at uppersecondary schools are roughly classified into two groups: the generaleducation course and the vocational education course. In both of thesecourses, the minimum credits required for graduation are 80, (one creditconsists of 35 unit hours in the course of one school year, one unit hourbeing 50 minutes of teaching) and students in vocational courses must obtainat least 30 credits in the relevant vocational sub . t areas such asAgriculture, Fisheries, Engineering, and Commerce._ Table II-8 indicatesthe number of courses and students at upper secondary schools.

Table II-8. UPPER SECONDARY SCHOOLS

Courses No. of Courses No. of Students(%) ('000) (%)

General 4,724 (55.8) 3,322 70.5)Agriculture 494 (5.8) 154 (3.3)Engineering 842 (9.9) 462 (9.8)Commerce 1,218 (14.4) 558 (11.8)Fisheries 54 (0.6) 16 (0.3)Home economics 733 (8.6) 139 (3.0)Nursing 162 (1.9) 27 (0.6)Others 250 (3.0) 33 (0.7)

Total 8,477 (100) 4,711 (100)

Source: Ministry of Education, 1984

As shown in this table, more than 70% of students in upper secondaryschools take general rather than vocational courses. Since vocational courseschool leavers do not always get occupations in the same industry as thatcovered by the courses they have studied at school, most of the school leaversstart work without any vocational training. Table II-9, which indicates thepercentage of occupations of upper secondary leavers classified by theircourses in school, clarifies this point.

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Table II-9. PERCENTAGE OF UPPER SECONDARY SCHOOLLEAVERS' OCCUPATION

Special- Office Agric. and Plantists workers fisheries workers Other Total

General 0.8 15.2 0.3 10.2 16.4 43.6Agriculture 0.2 0.5 0.8 3.1 2.3 6.9Engineering 1.1 0.5 0.1 13.5 3.5 18.7Commerce 0.2 13.9 0.1 2.9 6.7 23.8Fisheries 0.0 0.0 0.1 0.3 0.3 0.7Other 0.8 1.3 0.0 1.6 2.6 6.3

Total 3.1 31.4 1.4 31.6 31.8 100

Note: Total number of school leavers is 621,038.

Source: Created from the Ministry of Education, Basic Survey of Schools, 1982

According to the results in Table II-10, only 30% of upper secondary leaversstate that their occupation is very or somehow related to the subjects theystudied in school. In the case of plant workers (Table II-9) trained schoolleavers account for only 43% (13.5/31.6) of all leavers in this occupation.In other words, when companies employ upper secondary school leavers as plantworkers, 57% of them are not trained for this occupation. In the case ofoffice workers, we get almost the same percentage. This implies thatvocational courses at upper secondary schools do not play a significant rolein producing skilled manpower, and that general course leavers are trained ina company. We will examine the reasons for this in Chapter II-(3).

Table II-10. RELATION BETWEEN OCCUPATION AND SUBJECTS ATUPPER SECONDARY SCHOOL

Very related 9.2Somehow related 22.7Rarely related 34.2Not related 21.8Don't know 9.2Other 2.9

Source: Ministry of Education, Report of Industrial Education,in Miyoshi.

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Technical Colleges (KOTO SENMON GAKKO or KOSEN)

Technical colleges were inaugurated in 1962 as unique highereducational institutions for science and technology. As shown in Diagram II-2, technical colleges are connected directly to lower secondary schools andgive five years continuous education and training. Therefore, in thesecolleges, students can get higher education immediately after the completionof compulsory education. Compared with the combined school hours of uppersecondary school (general course) and university for seven years, Table II-il,technic Icolleges give less general education, but more specialized edu-cation.- Technical colleges are therefore more effective, in the sense ofthe period of skill acquisition, than a combination of upper secondary schooland university.

Table II-ll. COMPARISON OF TEACHING HOURS

General Specializededucation education Total

Upper secondary school 4,450 3,000-3,200 7,450-7,650and university (58.9) /a (41.1) /a (100)

Technical college 2,975 3,640 6,615(45.4) (54.6) (100)

/a These percentages, in parentheses, are based on 3,100 hours ofspecialized education.

Source: Shimosaka, pp. 75, 76 in the Japanese National Commission for UNESCO,1972.

Universities and Junior Colleges (DAICAKU and TANDAI)

Institutions of higher education in Japan comprise universities andjunior colleges, together with technical colleges and special training schools(described later). The length of a university undergraduate course is fouryears for most courses, and six years for medicine and dentistry. Juniorcolleges, which have two or three year courses, aim at fostering suchpractical abilities as are required for vocational or daily life. Table II-12indicates the number of students classified by specialization at universities(undergraduate), junior colleges (undergraduate) and graduate schools. Asshown in the table, there were about 2.2 million students at universities andjunior colleges in 1983. However, they do not necessarily acquire skills orknowledge directly related to their future occupations. "Humanities" and"Social Science" courses in particular have very little relation to students'future occupations in Japan. With regard to skill acquisition, we should notethat the percentage of students in "Natural Science", "Engineering(Industry)", "Agronomics (Agriculture)", "Medicine and Dentistry (Health)" and"Pharmacy" courses is only 30.4%. Table II-13 shows this point more clearly.

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Table II-12. NUMBER OF UNIVERSITY STUDENTS CLASSIFIEDBY SPECIALIZATION (AS OF MAY 1983)

University Junior Coll. Graduate(undergrad.) (Undergrad.) schools Total('000) (Z) ('000) (%) ('000) (%) ('000) (%)

Humanities 244 (14.1) 82 (21.8) 8.7 (14.1) 335 (15.5)Social science 680 (39.3) 35 (9.3) 6.5 (10.5) 721 (33.3)Natural science 58 (3.4) - 6.6 (10.6) 65 (3.0)Engineering 339 (19.6) 20 (5.3) 19.7 (31.8) 379 (17.5)(Industry)Agronomics 60 (3.5) 4 (1.1) 5.5 (8.9) 70 (3.2)(Agriculture)Medicine and 75 (4.3) 19 (5.1) 9.0 (14.6) 103 (4.8)

Dentistry(Health)Pharmacy 41 (2.4) - 0.5 (0.8) 41 (1.9)Home economics 32 (1.8) 101 (26.9) 0.3 (0.5) 133 (6.1)Pedagogy 134 (7.7) 85 (22.6) 3.4 (5.6) 222 (10.2)Culture - 8 (2.1) - 8 (0.4)Arts 45 (2.6) 20 (5.3) 1.3 (2.1) 66 (3.0)Others 22 (1.3) 2 (0.5) 0.4 (0.7) 25 (1.1)

Total 1,730 (100) 376 (100) 62 (100) 2,168 (100)

Note: () is a subject in Junior College

Source: Ministry of Education, 1984.

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Table II-13. PERCENTAGE OF GRADUATES' OCCUPATIONCLASSIFIED BY SPECIALIZATION

(as of May 1983)

Office SalesSpecialists Teachers workers workers Others Total

Humanities 0.7 2.1 10.3 1.8 0.6 15.5Social science 1.1 0.6 18.1 11.0 1.6 32.4Natural science 1.2 0.5 0.2 0.1 0.1 2.1Engineering 14.1 0.2 0.5 0.7 1.0 16.5(Industry)Agronomics 0.1 1.4 0.5 0.4 0.4 2.8(Agriculture)Health 3.2 0.3 0.2 0.1 0.0 3.8Home economics 2.0 0.6 6.5 0.6 0.3 10.0Pedagogy 2.6 7.3 2.6 0.3 0.4 13.2Arts 1.3 0.7 0.2 0.2 0.1 2.5Others 0.1 0.0 0.7 0.1 0.0 1.0

Total 26.4 13.7 39.8 15.3 4.5 100

Note: The number of total graduates is 427,381.

Source: Created from Ministry of Education, 1984.

We can see from this table that only 18.6% of graduates who majoredin natural science, engineering, agronomics, and health, became specialists.The table also shows that 60% of graduates who find occupations work as officeworkers, sales workers or other nonspecialists. We can assume that this 60%of graduates start working with little or no vocational training for theiroccupation. They get their training in a company as we will examine in thenext chapter.

Miscellaneous Schools and Special Training Schools (KAKUSHU GAKKOand SENSHU GAKKO)

Miscellaneous schools have been traditionally neglected from themainstream of education. However, from the point of view of skillacquisition, miscellaneou 7chools play important roles which other formal"schools" cannot fulfill.16 First, miscellaneous schools offer a wide rangeof opportunities for skill acquisition. As shown in Table II-6, there areabout 4,700 miscellaneous schools, offering various types of courses whichcover such areas as home economics, medical care, engineering, commerce, artsand culture, etc. Second, they can quickly respond to the latest needs ofvocational training because most of them are privately run and of relativelysmall size. For example, with the progress of technology in the 1960s, manymiscellaneous schools were newly established in the areas of electronics and

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computers. Third, many of the courses in miscellaneous schools are closelylinked with occupational qualifications and trade skill tests.

In 1976, the School Education Law formally recognized some of themiscellaneous schools as "schools". These are special training schools. Inorder to be a special training school, each miscellaneous school must enroll40 or more students and the length of each course must be minimum one year,with 800 or more teaching hours per year. Special training schools can beclassified into three types by their courses: upper secondary courses, (KOTOSENSHU GAKKO) for the graduates from lower secondary schools, advanced orcollege courses (SENMOM GAKKO) for the graduates from upper secondary school,and general courses (SENSHU CAKKO) for other students. As shown inTable II-14, in 1983, there were 2,860 special training schools with 512,180students. Their role in producing middle level technicians is significant.

Table II-14: SPECIAL TRAINING SCHOOLS

No. of Schools No. of students

(Recapitulation) 2,860 512,180Upper secondary course 416 77,358Advanced or college course 2,328 385,911General course 116 48,911

Source: Ministry of Education, 1984.

Expenditure

Lastly, let us briefly examine the educational expenditure for theschools administered by the Ministry of Education. Table II-15 indicatesschool expenditure classified by type of school. This includes all theexpenditures for education at national, public and private institutions. Fromthis table we can observe the following two points. First, the ratio of totalexpenditure against national income has steadily increased from 5.6% in 1955to 7.6% in 1978. Second, the share of the expenditure for compulsoryeducation has decreased from 64.0% in 1955 to 55.4% in 1978, and it has beenreplaced by an increase in the rate of upper secondary school and highereducation. This is mainly because the rates of enrollment in upper secondaryschool and higher education have rapidly increased, although that ofcompulsory education had already reached 100%.

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Table II-15: SCHOOL EXPENDITURE CLASSIFIED BY TYPE OF SCHOOL(Y billion)

Year 1955 1960 1965 1970 1975 1976 1977 1978(%)

Kindergarten 2.0 1.7 2.1 2.9 3.8 4.0 4.1 4.1Compulsory

education 64.0 60.2 51.1 53.5 56.1 55.2 55.0 55.4Upper secondary

school 15.7 17.7 21.4 19.0 18.5 18.5 18.1 18.0Higher education 16.0 17.6 22.2 21.4 19.6 20.1 20.4 20.2Special tra. sch.& misc. school 2.3 2.8 3.1 3.2 2.0 2.2 2.4 2.2

Total 407 702 1,657 3,237 8,809 9,882 11,220 12,612

Rate againstnational income 5.6 5.3 6.3 5.3 7.1 7.2 7.3 7.6

Source: Ministry of Education, 1981.

Table II-16 shows school expenditure in 1978 classified bydefrayer. The following points should be observed from this table. First,more than 70% of total expenditure is accounted for by the local governmentand private school, and the share of the national government is less than30%. The national government pays for more than half of the expenditure forhigher education. Compared with expenditures in the Meiji period, thesituation appears similar. Second, more than 80% of upper secondary schoolexpenditure is accounted for by the local public entity. This means demandfor enrollment in upper secondary schools, where the rate of enrollmentreached 94%, has been met by local government financing. Third, it should benoted that 96.6% of the expenditures for special training schools and miscell-aneous schools are accounted for by private schools, and 81.4% of the expendi-ture is paid back by the students. This implies that the cost of acquiringskills in special training schools or miscellaneous schools is more expensivethan in other institutions such as vocational courses at upper secondaryschools.

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Table II-16: SCHOOL EXPENDITURE IN 1978CLASSIFIED BY DEFRAYER, (%)

Local SchoolNational public juridical Payment bygovt. entity person, etc. students

Kindergarten 2.2 37.8 60.0 53.4Compulsory education 33.0 65.7 1.3 0.9Upper secondary

school 2.4 80.5 17.1 18.1Higher education 51.7 5.7 42.6 28.2Special tra. sch.

& misc. school 0.8 2.6 96.6 81.4

Total 29.3 53.6 17.1 13.5

Source: Ministry of Education, 1981.

(b) Program Administered by the Ministry of Labor

The main purpose of this section is to examine the presentvocational training system regulated by the Vocational Training Law. First ofall, it is useful to clarify some differences between the program administeredby the Ministry of Education, especially vocational courses in upper secondaryschools, technical colleges and special training schools, and that adminis-tered by the Ministry of Labor.

First, vocational education and training in the Education Ministry'sschools is regarded as only part of the education which aims at the fulldevelopment of the students' personality (Fundamental Law of Education),whereas the Labor Ministry's institutions aim at the development of theworkers' abilities necessary for their occupation (Vocational Training Law).However, their subjects are not completely different, since both of them aimat providing useful skills for students. The Vocational Training Law statesthat vocational training must be practiced without duplication of schooleducation, but with close relation to it (Article 3). Therefore, we can saythat these two programs are different basically in their viewpoints.

Second, although the program administered by the Ministry ofEducation has almost the same curriculum in any part of Japan, that of theMinistry of Labor has various kinds of courses according to the needs of theregions where the schools are located. The Ministry of Education's curriculumincludes more basic and general subjects than the Ministry of Labor's but thelatter has more flexibility in its subjects and can-more easily meet thedemands of the region and of industry.

Third, with regard to the duration of the course, the programadministered by the Ministry of Education is for at least one year (for

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example, 1-3 years in special training schools, 3 years in the vocationalcourse at upper secondary schools, 5 years in technical colleges). Most ofthe programs administered by the Ministry of Labor, however, are less than oneyear.

Fourth, in the case of schools administered by the Ministry ofEducation, almost all of the students come directly from lower or uppersecondary schools. In the case of schools administered by the Ministry ofLabor, however, they accept not only young school leavers but also currentworkers, workers who are out of employment, and those who intend to changetheir occupation.

According to the Vocational Training Law (first enacted in 1958 andcompletely revised in 1972), vocational training is basically classified intotwo types: public vocational training and authorized vocational training inan enterprise. The former is given to job-seekers, such as new graduates, andworkers changing employment. The latter is provided by the owner(s) of anenterprise(s) to currently employed workers. We will concentrate on thepublic type of vocational training here, since the enterprise training isexamined in Chapter III-(I). Table II-17 shows the types of vocationaltraining institutions and their training courses.

Table II-17: VOCATIONAL TRAINING INSTITUTIONS AND TRAINING COURSES

Occupationcapability

Basic Upgrading re-develop. Instructortraining training training training

Vocational Training * * *School

Junior VocationalTraining College *

Skill Development * *Center

Institute of Voc.Training *

Voc. Training Schoolfor the Handicapped * * *

As shown in the table, four types of training are regulated by theLaw. Basic training (YOSEI KUNREN) has two course levels: the ordinary

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training course, mainly for lower secondary school leavers and the advancedtraining course, mainly for upper secondary school leavers. Both courses aimto give new school leavers the basic skills and knowledge necessary to bemulti-skilled workers. The duration of courses varies from six months to oneyear, two years, or three years. Upgrading training (KOJO KUNREN) has fourtypes of courses: grade I trade certificate training course, grade II tradecertificate training course, supervisory training course and skill updatingtraining course. They are focussed on workers who have already basic skillsand knowledge. The skill updating training course, especially, aims athelping them to catch up with technological progress in industries. Theduration of the courses is relatively short: 10 hours, 12 hours, 40 hours, orbetween one and six months. Occupational capability redevelopment training(NORYOKU SAIKAHATSU KUNREN) focusses especially on workers who intend to getalternative jobs for which they are not trained. The duration of the trainingis for two months, three months, six months, nine months or one year.Instructor training (SHIDOIN KUNREN) aims at providing the necessary skillsand knowledge to be a vocational training instructor and is for four years.This training is conducted only by the Institute of Vocational Training.

These four types of vocational training are carried out in the fivetypes of vocational training institutions, namely, vocational trainingschools, junior vocational training colleges, skill development centers,Institute of Vocational Training, and vocational training schools for thehandicapped. Table II-18 indicates the number of institutions and trainingplaces. The first four types of institutions are briefly described below.

Table II-18: NUMBER OF VOCATIONAL TRAINING INSTITUTIONSAND STUDENTS IN 1981

No. ofNo. of No. of training

facilities subjects places

Vocational Training Schools 378 2,521 283,122Junior Vocational Training Colleges 6 34 1,040Skill Development Centers 2 - 4,620Institute of Vocational Training 1 15 1,200Vocational Training Schools for the

Handicapped 12 117 2,290

Source: Ministry of Labor

Vocational Training Schools (SHOKUGYO KUNRENKO)

This is the most popular type of vocational training institution.Because most of the vocational training schools are established by theprefectural government or municipal government, they can easily meet localdemand for vocational training. They provide basic training for lower and

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upper secondary school leavers, and upgrading training and redevelopmenttraining for adults. Vocational training schools managed by the EmploymentPromotion Project Corporation (EPPC) (an organization established by thenational government) are now being converted into junior vocational trainingcolleges or skill development centers.

Junior Vocational Training Colleges (SHOKUGYO KUNREN TANKI DAICAKU)

Junior vocational training colleges were newly established in 1973in order to meet manpower demands resulting from the rapid progress of scienceand technology. The colleges are aimed at providing basic training for uppersecondary school leavers and producing technicians who have both skills andknowledge in science and technology. The colleges have an important role inthe history of Japanese vocational education and training, because they arethe first institutions to try to combine practical skills and swintificknowledge at the higher education level since the Meiji period. 7

Skill Development Centers (GINO KAIHATSU SENTA)

Skill development centers were established to provide upgradingtraining and redevelopment training, especially for adults in employment ortemporarily unemployed. Although there were only two centers in 1981, many ofthe vocational training schools managed by EPPC are to be converted into skilldevelopment centers within a few years. This is because the main purpose ofskill development centers is to help adult workers in employment to catch upwith technological progress and the unemployed to get new jobs more easily.The centers are expected to play an important role from now on.

The Institute of Vocational Training (SHOKUGYO KUNREN DAIGAKUKO)

The Institute of Vocational Training was established in 1961 as acenter of the whole vocational training system. The main purpose of theInstitute is to produce professional vocational training instructors and tocarry out research and studies on vocational training. Its activities includeinternational technical cooperation such as providing training courses forinstructors from developing countries, and also for Japanese instructors whointend to go to developing countries.

Expenditure

Lastly, let us briefly examine the expenditure on vocationaltraining. Table II-19 shows the national and local budget for vocationaltraining in 1982. "General account" is mainly spent on the prefecturalvocational training schools, "labor accident" payment on national vocationaltraining schools for the handicapped, "coal & oil payment" on the training ofworkers leaving mines, and "employment payment" on other purposes.

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Table II-19: NATIONAL AND LOCAL BUDGET FOR VOCATIONAL TRAINING IN 1982(Y million)

Management Personnel Equipmentexpenses expenses expenses Total

(%)

NationalGeneral account 5,404 11,142 0 16,546

(17.2)Employment payment 40,940 1,716 14,732 57,388

(59.6)Labor accident payment 20. 0 990 1,010

(1.0)Coal & oil payment 20 50 0 70

(0.1)Subtotal 46,384 12,908 15,722 75,014

(77.9)

Local 8,580 9,666 2,994 21,240(22.1)

Total 54 964 22 574 18 716 96,254(57.1) (23.5) (19.4) (100)

Source: Ministry of Labor.

Compared with the school expenditure administered by the Ministry ofEducation (Tables II-15 and II-16), we can note the following two points fromthis table. First, the amount of the expenditure for vocational trainingadministered by the Ministry of Labor is far less than that of the Ministry ofEducation. The former in 1982 was only 0.8% of the latter in 1978. Second,in the case of vocational training administered by the Ministry of Labor, thenational budget shares 78% and the local budget 22%, although in the case ofthe program administered by the Ministry of Education, the national share isonly 30% and the local 54%.

3. Academic Qualification Society and Economic Development

Based on the previous examination of the Japanese education andtraining system in the Meiji and contemporary periods, we will analyze, inthis section, the meaning and role of this system in Japanese economicdevelopment.

It is important to understand that Japan is a so-called GAKUREKISHAKAI (academic qualification society). First, in Japan, important factorsof one's social life such as wage, promotion and social status are basicallydetermined by one's final academic qualification. Second, the purpose of

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one's education is not what one learns but what kind of academic qualficationone gets. Third, almost all members of the society try to take part in thefierce competition to go up the Ladder of academic qualification.

Table II-20 indicates the wage differential classified by academicqualification. It is obvious from the table that there are distinctivedifferentials among the different qualification levels. A university graduate(male) can get Y 127,200 as his starting salary, and Y 262,600 as an averagesalary of all ages, while a lower secondary school leaver (male) can get onlyY 91,000 and Y 204,200 respectively.

Table II-20: WAGE DIFFERENTIALS CLASSIFIED BYACADEMIC QUALIFICATION IN 1982

(Y'000)

Starting salary Average salaryMale Female Male Female

University 127.2 119.1 262.6 174.7Junior college or technical

college 111.2 106.1 227.8 143.2Upper secondary school 103.4 97.5 214.2 132.3Lower secondary school 91.0 81.3 204.2 116.1

Average n.a. n.a. 222.0 130.1

Source: Created from Ministry of Labor, 1983.

Table II-21 indicates the rates of return by educational level inJapan. These data also show that the private rate of return from highereducation is 2-3% higher than that from secondary education.

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Table II-21: RATES OF RETURN IN JAPANESE EDUCATION

Data I Data II

PrivateSecondary education 6.0 5.9Higher education 9.0 8.1

SocialSecondary education 5.0 4.6Higher education 6.0 6.4

Sources: Data I: Psacharopoulos, in World Bank, Education and Income,1984, p. 18.Data II: Umetani, in World Bank, ibid, p. 85.

There are many other discriminations based on academic qualificationas well as the wage differentials. For example, not only some professionaloccupations such as doctors and teachers, but also prospective positions ingovernment and enterprises are restricted to university graduates by thewritten or unwritten codes.

Among university graduates, there is also discrimination based onthe name of the university. This is the so-called university nominationsystem in employing new university graduates. This means that some of theJapanese companies recruit new graduates exclusively from several "prestigiousuniversities." Graduates from other "nonprestigious universities" are noteven given the chance to take an interview. Table II-22 shows the percentageof companies which adopt the university nomination system, classified by thesize of the companies. From this table, we can gather that the larger acompany is, the more it adopts the university nomination system. Only 31Z oflarge companies (more than 5,000 workers) do not use any system of nomina-tion. In spite of such a high rate of nomination, big companies succeed inemploying the necessary new graduates from nominated universities. The reasonis shown in Table II-23, which shows wage differentials classified by the sizeof the companies. The average wage in small companies (10-99 workers) is only70X of that in large companies.

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TABLE II-22: UNIVERSITY NOMINATION SYSTEM(of 1,100 companies in 1975)

Size of Company 100 - 500 - 1,000- 5,000 - Average(No. of workers) - 99 499 999 4,999

Nominate both univ. andthe department 9.9 12.1 14.4 29.5 32.5 19.1

Nominate onlydepartment 21.1 36.7 48.4 43.8 36.4 31.2

Do not have the system 69.0 51.2 37.2 26.8 31.2 40.6

Source: Japan Rekuruto Center, taken from Yakura, 1978, p. 23.

Table II-23: WAGE DIFFERENTIAL INDEX BY SIZE OF COMPANY (1982)(Manufacturing)

Size of companyby no. of workers 10 - 99 100 - 999 1,000 -

Wage index 70.4 78.3 100

Source: Ministry of Labor, 1983.

Therefore, people know that to get a high salary in a big company,they must go to university, especially a prestigious one, and to go to aprestigious university, they must go to a prestigious upper secondary school,to go to a prestigious upper secondary school, they must go to a prestigiouslower secondary school, and so on. In order to go up this educational ladder,everybody has to take and pass the very competitive entrance examination ateach gateway. (The most important entrance examination is, of course, that touniversity.) It is reported that pre-pre-kindergarten has failed to deviseadequate lhsts for two years olds and has decided to test their mothersinstead.- This educational spiral is called "examination hell", in whicheverybody's future is determined. Thus, the academic qualification societyhas a sharp pyramid structure, which consists of, from the bottom, lowersecondary school leavers, upper secondary school leavers, junior college andtechnical college graduates, and university graduates. Because the rate ofattendance at university has reached 35%, there is also stratification amongthe universities. Among more than one thousand institutions for highereducation in Japan, the University of Tokyo is located at the top of this

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pyramid. It is followed by other national and prestigious privateuniversities such as Kyoto University, Hitotsubashi University, WasedaUniversity and Keio University. Many other public and private universitiesrank after these universities.

In the academic qualification society, this educational ladder-through entrance examinations is almost the only channel of social mobility.An OECD educational mission to Japan, therefore, reported that Japan was notan aristocratic society, where one's class and life are determined by one'sbirth, but a degreeocratic society, where one's clasT9 and life are determinedby the entrance examination at the age of eighteen. -

In the academic qualification society, because the kind ofqualification one gets is more important than what one learns in school, everystudent studies only the subjects related to the entrance examination, namely,general subjects rather than vocational ones. Therefore, the vocationalcourse at upper secondary school is ranked at the bottom of the upper -secondary school strata. Table II-24 indicates the change of the rate ofattendance at upper secondary school and the share of students between generaland vocational courses.

Table II-24: RATES OF ATTENDANCE AT UPPER SECONDARY SCHOOLAND THE SHARES OF GENERAL AND VOCATIONAL COURSES

(1) (2) (3) (4) (5)Rate of Share of Share of

Year attendance general course voc. courses (1) x (2) (1) x (3)

1955 51.5 59.8 40.2 30.8 20.71960 57.7 58.3 41.7 33.6 24.11965 70.7 59.5 40.5 42.1 28.61970 82.1 58.5 41.5 48.0 34.01975 91.9 63.0 37.0 57.9 34.11980 94.2 68.2 31.8 64.2 30.01981 94.3 69.1 30.9 65.2 29.11982 94.3 70.0 30.3 66.0 28.61983 94.0 70.5 29.5 66.3 27.7

Source: Ministry of Education.

The table shows that the share of the general course has constantlyincreased since 1970.(and that of the vocational course has decreased).Furthermore, columns (4) and (5) show the percentages of students of the sameage who are enrolled in general and vocational courses. The enrollment rateof the general course has continuously increased from 30.8X in 1955 to 66.3%in 1983. We can safely conclude from this fact that people prefer the general

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course to the vocational courses. Table II-25, which shows the percentages ofstudents who wanted or did not want to enter their present course, confirmsthis conclusion.

Table II-25: STUDENTS' PREFERENCE FOR THEIR COURSES

Male FemaleCourse (1) (2) (3) (1) (2) (3)

General 73 15 11 81 12 8Agriculture 37 45 13 29 56 12Engineering 55 34 11 48 40 11Commerce 33 56 11 42 49 8Home economics - - - 35 55 10

Notes: (1) those who wanted to.enter present course(2) those who wanted to enter different course(3) those who did not mind the course

Source: Ministry of Education, taken from Miyachi.

Vocational training administered by the Ministry of Labor is alsonot popular among the school leavers. Table II-26 shows the rate ofutilization of the places for basic training. As shown in the table, in spiteof the reduction of training places, only 70-80% of the places have alwaysbeen filled.

Table II-26: RATES OF UTILIZATION OF BASIC TRAINING PLACES(thousand)

1973 1974 1975 1976 1977 1978 1979 1980

Number ofplaces 59.8 59.9 56.8 56.5 55.9 55.1 52.5 48.6

Number oftrainees 47.7 48.3 46.8 46.6 46.1 44.7 43.3 39.7

Rate of utili-zation (%) 79.8 80.6 82.4 82.5 82.5 81.1 82.5 81.2

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As a result of this bias toward general education, about 70% ofupper secondary leavers and 60% of university graduates are not trained, whenthey start working. To get the necesary skills and knowledge for their jobthey are trained in a company. But, why doesn't the company employ schoolleavers who have already received vocational training in school? And whatrole does this educational system play in Japan's economic development? Inorder to answer these questions, we should note the following two points aboutthe role of the Japanese school system.

First, from what we have observed so far, all pupils and students inJapan have to compete and study general subjects very hard for many years. Asa result, a well-educated mass of people with a strong background in generaleducation is produced. They have an advantage, because in a time of rapidtechnological progress, a deep and wide range of general knowledge is moreuseful than specific vocational skills, which may soon become obsolete.

Second, the Japanese education system works as a sophisticateddevice for selection. In the academic qualification society, the name of theuniversity and its department gives little information about what studentslearned there. However, it indicates the level of their general ability amongthe whole of society. General ability does not mean specific skills orknowledge but their potential. That is why Japanese companies accept theuniversity nomination system. By employing graduates from "first class"universities, they can expect them to have " first class" general ability andpotential. Since Japanese companies adopt a so-called lifetime employmentsystem, what they are most concerned about in employing new graduates is theirlifetime potential capability. Once they get a "golden egg", as long as theyfoster it properly, it can be expected to be a " golden hen" in the future (Wewill examine how they foster it in the next chapter).

Of course, the academic qualification society has brought about aserious social problem named the "diploma disease" by Dore, but generallyspeaking, nothing seems to have changed so far.

"The system works well enough ---- ; provided one thinks of it as anenormously elaborated, very expensive intelligence testing systemwith some educational spin-off, rather than the other way round.One suspects that Japan's more conservative leaders, though they areprepared to shake their heads over the system with those who deploreit, are secretly well satisfied. The examination hell sorts thesheep from the goats; a man who can't take the psychological strainwould be no use anyway. If you need convincing of the virtues ofmeritocracy - of getting the top brain in the top place - look, theywould say, at our economic growth record". (Dore, The DiplomaDisease, pp. 48-50)

Part of Japan's economic growth is sustained by this examination hell.

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CHAPTER III

THE ROLE OF COMPANIES IN THE UPGRADINGAND UTILIZATION OF MANPOWER

1. Education and Training in a Company

/This section aims at examining the in-company education and trainingsystem.20 As indicated in Table III-1, 85% of the Japanese labor force isengaged in the private sector of secondary and tertiary industries, and theyproduce more than 90% of total GDP. Manufacturing industry employs 24% of thelabor force and produces 30% of GDP. Since most of the labor force is workingin companies, it is meaningful to examine their education and training systemin order to understand the role of manpower in Japan's economic development.In the following we will first briefly look at: (a) government policies forskill acquisition in a company, then, examine (b) the education and trainingsystem in a company.

Table III-1: DISTRIBUTION OF LABOR FORCES AND GDP

Labor forces GDP(1980) (1982)

Primary industries 10.9 4Secondary industries 33.6 42

(manufacturing) (23.7) (30)Tertiary industries 55.4 54

(public sector) (3.6) (n.a.)

Total 100 100

Note: Total number of the labor force is 55,811,000 and it includes"others". Total amount of GDP is $1,061 billion.

Source: Ministry of Labor, World Development Report, 1983.

(a) Government Policies for Skill Acquisition in a Company

The Vocational Training Law, which represents the Government'svocational training polift7s has two origins, namely, skilled workers trainingand vocational guidance.-

The Government began to be concerned about in-plant skilled workerstraining in the late 1930s, mainly because of the military requirement. In

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1939, the ordinance of skilled workers training in factories and workshops wasenacted,and large factories were obliged to train skilled workers with agovernment subsidy. Although the law was abolished at the end of World WarII, the idea of in-plant skilled workers training was retained in a newlyenacted Labor Standard Law of 1947. It is important to note that the LaborStandard Law regulated in-company vocational training from the viewpoint ofcriticizing apprenticeship. This is because in the pre-war period, there wassevere exploitation of young workers under the name of apprenticeship. There-fore, the Law aimed to establish a modern skill acquisition system in acompany. This is the origin of authorized vocational training in an enter-prise(s) regulated by the present vocational training law.

Another origin of the present vocational training policies isvocational guidance which started in the 1920s. In order to cope with theunemployment problem, the Government established vocational training insti-tutions, since there was a shortage of skilled workers even at a time of massunemployment. In 1947, after World War II, the Employment Security Law wasenacted to give the unemployed vocational training in public institutions.This has developed into the present system of public training institutionswhich we examined in Chapter II-(2)-(b).

These two training programs, namely, skilled workers training basedon the Labor Standard Law, and vocational guidance based on the EmploymentSecurity Law, were unified into the Vocational Training Law in 1958, justbefore Japan started its high economic growth (the Law was completely revisedin 1969 in order to meet Japan's rapid economic development). The Lawrequires the Minister of Labor to prepare the basic scheme of vocationaltraining which indicates the fundamental direction of the policies forvocational training and skills certification (Articles 5), and each prefecturegovernor is to prepare the prefectural scheme of vocational training based onthe basic scheme (Article 6).

The first and the second basic scheme based on the revisedVocational Training Law were planned for 1971-75 and 1976-80 respectively, andthe third scheme (for 1981-85) is now being enforced. The aims of the presentbasic scheme of vocational training, which is subtitled "Preparation forcareer training system",are: First, basic vocational training should beprovided for young persons who are going to start working, according to theirability and aptitude. It is necessary to strengthen the relation betweenschool education and public vocational training. Second, training forcurrently employed workers should be strengthened, because we can expectstructural change in industries, technological innovation, extension ofworking career and demand for self-development, etc. In order to cope withthis situation, education and training organized by employers has to bedeveloped, and supported by public vocational training. Third, occupationalcapability redevelopment training should be provided, especially for personsleaving and changing occupations and women intending to work. Fourth, theevaluation system for vocational capability should be provided according toeach stage of the working career, and the skill certification system must beexpanded. Fifth, Japan should play an important role in internationaltechnical cooperation through vocational training.

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Within this comprehensive scheme, we can observe the concerns in thesecond and third points corresponding with the two original purposes ofvocational training policies mentioned above. We shall focus on the secondpoint, namely, goverment policy for authorized in-company vocational training.(We have already examined vocational training in the public institutions inthe previous chapter.)

The Vocational Training Law regulated that prefectural governors canauthorize vocational training conducted by employers, their association,juridical persons, or trade unions, when they meet the prescribed standard(Article 24), and authorized employers or associations can establishvocational training schools, junior vocational colleges or skill developmentcenters (Article 25). The national and prefectural governments are requiredto provide various types of assistance and incentives for both employers andemployees undertaking authorized in-company vocational training. Theassistance and incentives include: traineeship loan, training allowance forthe unemployed, financial assistance to smaller enterprises with less than 300employees (in retail and services less than 50, and in wholesale less than100), professional advisory an2d institutional services, incentive grant forpaid educational leave, etc. - In 1981, Y 2,092 million was subsidized formanagerial expenses in 812 authorized in-company vocational training schemes,Y 186 million for 14 vocational training in2 tutions, and Y 172 million for199 items of vocational training equipment.M Although, compared with thegovernment expenditure on school education (Table II-14), these amounts arevery small, it should be noted that the Government gives private companiesfinancial assistance in order to promote vocational training.

Authorized in-company vocational training is performed by singleenterprises or an association of enterprises. The former is implemented byrelatively large companies, and the latter by relatively small companies.Table III-2 indicates the number of authorized in-company vocational traininginstitutions and the number of employers organizing the training insti-tutions. From this table, we can observe the following points. First, thepercentages of the number of single employers, which are relatively bigenterprises, are only 0.2-0.3%. However, they share 26-28% of the totalauthorized vocational training institutions. Second, 99.7 or 99.8% ofemployers who organize authorized vocational training institutions areperforming the training as associations. This fact implies that almost allenterprises which use the authorized in-company vocational training system,are relatively small companies.

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Table III-2: AUTHORIZED IN-COMPANY VOCATIONALTRAINING INSTITUTIONS

1978 1979 1980 1981

No. of Employers

Single 262 257 263 305(0.3) (0.2) (0.2) (0.2)

Association 99,425 143,682 152,581 179,091(99.7) (99.8) (99.8) (99.8)

Total 99,687 143,939 152,844 179,396

No. of Institutions

Single 262 257 263 305(28.2) (25.9) (26.5) (28.3)

Association 667 734 730 771(71.8) (74.1) (73.5) (71.7)

Total 929 991 993 1,076

Source: Ministry of Labor.

It is important, however, to note that the total number of enter-prises in Japan was more than 5.8 million in 1978. Therefore, the percentageof enterprises which have authorized in-company vocational training institu-tions individually or as an association is only 1.7% of all enterprises.Almost all companies are performing employees' training in another way, ratherthan using the authorized vocational training system. We will examine this inthe next section.

(b) Education and Training System in Japanese Companies

Although the purpose of this section is to examine the in-companyeducation and training system, it is important, first of all, to clarify thedifference among companies. Roughly speaking, Japanese companies areclassified into two groups by their size, namely, large companies, and smalland medium companies. According to the Fundamental Law of Small and MediumEnterprises, small and medium companies are defined by the number of employeesor the amount of capital. In the case of manufacturing business, for example,small and medium companies are defined as those with less than 300 employeesor less than Y 100 million of the capital. Table III-3 indicates the share oflarge and small and medium enterprises classified by industries. From thistable, we can observe that more than 99% of enterprises are small or mediumcompanies in any industries. Although in the following part of this paper, wewill mainly concentrate on companies in the manufacturing industry, it is

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important to note that the number of manufacturing companies shares only 144.4%of all companies (in terms of the numbers of workers, it shares 29.6%). _

Table III-3: SHARE OF THE NUMBER OF LARGE COMPANIESAND SMALL AND MEDIUM COMPANIES

Small and Medium Large Total No.___________ ( -) - (%)

Mining 99.5 0.5 6,817 (0.1)Construction 99.9 0.1 495,345 (8.5)Manufacturing 99.5 0.5 841,132 (14.4)Retail, wholesale 99.6 0.4 2,865,596 (49.0)Finance, insurance 99.5 0.5 75,261 (1.3)Real estate 100.0 0.0 213,331 (3.6)Transport, etc. 99.5 0.5 115,096 (2.0)Electricity, gas, etc. 97.5 2.5 5,305 (0.1)Service 98.6 1.4 1,231,708 (21.1)

Total 99.4 0.6 5,849,591 (100.0)

Note: Small and Medium means companies with less than 300 employees exceptwholesale (less than 100), retail (less than 50) and service (lessthan 50).

Source: Prime Minister's Office.

Table III-4 shows shares of the number of businesses, number ofworkers, amount of gross and net product among small, medium and largecompanies in manufacturing industry. From this table, we can observe thefollowing points. First, although the number of large companies is only 0.5%of all companies, they produce nearly half of the products. Second, althoughsmall companies share 87.2% in number, their share of gross product is only12.6%. These differentials among companies affect their in-company educationand training performance.

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Table III-4: SHARES OF MANUFACTURING COMPANIES CLASSIFIED BY SIZE

Size by number Small Medium Large Totalof employees (- 19) (20-299) (300 -) No./Yen

-------------- (% )… ----------

No. of companies 87.2 12.3 0.5 841,132

No. of workers (-----73.5 ------) 26.5 12,509,000

Amount of gross product 12.6 40.1 47.3 Y 162 trillionAmount of net product 16.1 41.0 42.9 Y 56 trillion

Source: Prime Minister's Office (first two rows), Ministry of InternationalTrade and Industry (last two rows).

Table III-5 shows the difference in education and trainingperformance between large enterprises, and small and medium enterprises. Wecan observe from this table that 42% of large companies have regular andsystematic education and training programs, while in the case of small andmedium companies, only 6.3% have them. This-is mainly because of thedifference of financial capability of education and training.

Table III-5: EDUCATION AND TRAINING PERFORMANCE INMANUFACTURING COMPANIES IN 1979

Large Small & Medium(%) (%)

Regular and systematic 42.0 6.3Systematic training as necessary 47.8 39.0Support for individual training 5.6 28.5Not systematic, obtain by experience in job 3.5 25.3Others 1.0 1.0

Source: Small and Medium Enterprise Agency, 1980.

Table III-6 indicates the index of the expenditure for education andtraining per worker classified by the size of company. It is obvious fromthis table that the smaller companies are, the less they spend for employees'education and training. Small companies which have between 30 and 99 workers

- 36 -

can spend only 20.4% of the amount spent by large companies which have morethan 5,000 workers for workers' education and training. Although we willexamine the system of in-company education and training in the following partof this section, it is important to remember the differentials among companiesthat we have observed so far.

Table III-6: INDEX OF EXPENDITURE PER WORKERFOR EDUCATION AND TRAINING

Size of company 30-99 100-299 300-999 1,000-4,999 5,000Index 20.4 31.2 52.5 61.0 100

Source: Small and Medium Enterprise Agency, 1983.

First of all, it is important to note the following three pointsabout the education and training system in Japanese companies. First, thesystem covers almost all levels of employees in a company, from blue collarworkers to white collar workers, new employees to old employees, clericalstaff to general managers. Second, under the lifetime employment system inJapan, this means a lifetime education and training system for all workers.All employees in a company continuously take various types of education andtraining at each stage of their working career until they retire. For thecompany, this system means that education and training for employees are along-term investment in the future development of human resources. Third,Japanese companies use the term of "education and training" in a broadsense. For example, when some of the managers state that a company is DOJO(literally, traditional training place where one practices the way of martialarts) of life, it means2 g7ery activity in a company is a part of education andtraining for employees.- Concretely speaking, they include not only on-the-job training and study seminars, but also formal and informal meetings at anylevel, company communications, purchasing specialized magazines, moral storiesfrom the president, and private counseling, etc. Even recreation such asparties, festivals and short trips organized by a company are sometimesregarded as a part of education and training.

Let us start by looking at the main method of education and trainingin companies. Tables III-7 and III-8 show the methods of education andtraining for managers and employees respectively, in manufacturing industry.

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Table III-7: METHODS OF SELF-DEVELOPMENT FOR THE MANAGEMENT

Small andLarge Medium

(%) (%)

Reading special newspapers and magazines,watching TV etc. 72.2 59.0

Attending various study seminars 78.1 58.0Having study meeting with other employers

in the same business 38.0 36.5Taking consultation from specialists 32.4 31.9Attending special educational institutions 10.2 6.5Others 4.3 2.6Do not do anything 5.6 11.8

Note: Because of multi-answers, total is not 100%.

Source: Small and Medium Enterprise Agency, 1983.

Table III-8: METHODS OF EDUCATION AND TRAINING FOR EMPLOYEES

Small andLarge Medium

(%) (%)

On-the-job education and training 87.0 82.8Attending study seminar in public training

institutions 53.9 41.1Attending seminar in a company 73.5 36.5Attending study seminar in private training

institutions 64.8 28.3Having study seminar with other companies in the

same business 8.4 17.9Working temporarily in the related companies 15.7 16.2Attending formal schools such as university and

special training schools 29.8 4.6Others 2.7 0.6Do not do anything 0.6 1.0

Note: Because of multi-answers, total is not 100%.

Source: Small and.Medium Enterprise Agency, 1983.

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The differences between Large, and small and medium companies aremainly derived from the differentials of financial capability of companies aswe examined before (Table III-6). We should also, however, note that there isa difference in the needs of manpower between large companies and small andmedium companies. Generally speaking, the former require manpower who havespecial knowledge and can make managerial policies or planning of R&D 6 yhilethe latter require those who have leadership in production and sales.-

We will roughly classify these methods into on-the-job education andtraining, and other institutional training, and briefly examine them in thefollowing.

On-the-job education and training is a very important method ofemployee education and training in a company. It has the followingfeatures: First, on-the-job education and training can be performedindividually based on one's educational needs and personal character. Second,through on-the-job education and training, one can acquire the knowledge andskills which are directly related to one's job. Third, on-the-job educationand training can be performed anytime and anywhere. In the case of on-the-jobtraining in Japanese companies, however, we should not miss another crucialrole, namely the formation of human relations in a company. The objectives ofon-the-job training are not only teaching some specific skills and knowledgebut also building tight human relations between staff and their chief.

Institutional training can be defined as vocational education andtrainin21based on a systematic curriculum for a certain period in a certainclass.- We can classify the institutional training into four types by itsorganizer: (a) institutional training organized by a company; (b) institu-tional training organized by an association of companies; (c) institutionaltraining organized by formal educational institutions; and (d) institutionaltraining organized by specialized management institutions. The first type isthe most popular method of training after on-the-job training in largecompanies (Table III-8). The second type is performed mainly by small andmedium companies. The third type includes a program to send employees (oremployers themselves) to formal educational institutions (for example, univer-sities, special training schools and miscellaneous schools), public vocationaltraining institutions (for example, vocational training schools, and skilldevelopment centers) or other public study seminars organized by companiesassociations, prefectural or municipal governments. The fourth type isperformed by specialized organizations such as the Japan productivity centers,and the Union of Japanese Scientists and Engineers. In the following section,we will concentrate on the first type, namely, institutional trainingorganized by a company, since other types of institutional training areusually used as a supplement to the first type.

Diagram III-I shows the in-company institutional training system ofNippon Steel Corporation, which is one of the largest companies in Japan.This is a typical education and training system of large Japanese manufac-turing companies. As shown in the diagram, the in-company institutionaltraining system is composed of two types of education and training, namely,specialized education and training, and stratified education and training.The former includes programs for white-collar employees and for blue-collar

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Diagram III-I : In-Company Education and Training Systemof,Nippon Steel Corporation

(A) Managerial Staff and White-Collar Employees

I Clerical Staff & | Maniger I Group I GenerallIEntineerinu 8taff I 1 Manager I ManagerI

(Stratified Training]

INew Emp.lITrainingi IMale Emp. 1-->IManager II (male)i-->1Triinin& _ ITraining II I I course ll IGroupt IGenerallI(female)l-->IFemale I I course 21 IMana.1 IManagerl

Ilmy.Train.1 I course 3I-->)Trai.l-->ITraini.I

tSpecialized Training)

ITechnoloiv Training (Elementary. ADplied. Special) 1IControl Technique Training IlComouter Trainint lForei2n Lantuaae Courses (Enflish.French.Chinese.SDanish.etc)I

(Othersl

1Lecture Meetine. Corresgondence Course I

(B) Blue-Collar Employees

I Ordinary Workers 1Assis.Foremanl Foreman I Manager I

[Stratified Training]

|New Emp.|->|Employeel---->1Assis.Forem.I->IForemanl---> to (A)ITraininal ITraininml ITrainini I 1Traini.1

IProspective Assi.1 IProsp.For.1IForeman Trainin8 I ITrainina I

[Specialized Training]

1Secial Technical Trainina (Section I. II. III. ) ,lMaintenance Skills Trainina I

ICogtrol Technique-Train-.11Safety Traininit IIJ.X. Leader Trainina I

[Others]

ILecture Meetina. Corresgondegce Course 1

[source] Nippon Steel Corporation…----------------------------------------------------------__-

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employees, and both of them are a vertical system in which some special skillsor knowledge are accumulatively instructed. Employees in any position takethis program according to their needs. For example, computer training,foreign language course, safety training, in the diagram are typical programsof specialized education and training. The latter is a horizontal system, inwhich all the employees in the same positions get trained.

As we examined in Chapter II-(3), Japanese companies hire newgraduates very carefully and selectively, paying attention to their potentialrather than their specific vocational skills or knowledge. Since Japanesecompanies have such a long-term perspective, initial education and trainingfor new employees is very important. Generally speaking, a one or two weeksintensive program is provided for all freshmen and women. Most of the largecompanies have their own training center, where all trainees stay for theperiod of training. Although the basic purpose of this orientation program isto give an introduction to the company and a basic knowledge of the business,the most important objective is to motivate new employees to work in thatcompany. The fundamental philosophy of the company, which is usually highlysociety-oriented, is given in a lecture by the president or the executives,and freshmen are urged to establish an attitude of mind as full-fledgedmembers of society and the company. Other spiritual attitudes such as pride,self-esteem, sense of duty and responsibility are also emphasized. It is alsoimportant to note that one of the most required virtues in Japanese companiesis a sense of harmony and teamwork, since all employees work in the samecompany for the rest of their lives. In order to promote this sense, forexample, some companies oblige all new employees to stay in the companydormitory for at least their first year. A retired ex-employee of the companybecomes the superintendent of the dormitory and takes care of both the privateand public life of new employees, and once a y8er, the president of thecompany is invited to the dormitory festival.

Stratified education and training programs continue every one to twoyears until new employees become middle-level manpower. The duration of theprogram is usually less than one week. The main objective is to promoteemployees' consciousness and understanding of their role in the company ratherthan teaching specific knowledge, which is learned in specialized educationand training courses or on-the-job training. Together with ordinary lecturingand seminars, several imported methods such as role playing, sensitivitytraining, transaction analysis, and case method, are often used to provide theopportunities to meet the executives, lecturers, and other employees.

In regard to managers' education and training, the main objective isto understand the whole system of the company from the managerial point ofview. They often have informal meetings with managers in other divisions ordepartments to discuss managerial problems. Another important objective ofmanagers' training is to learn how to guide their staff and raise theirmorale. They are required to have many formal and informal meetings withtheir staff. For example, in some cg!panies, general managers have lunch withevery staff member on his birthday.- They also organize recreationalactivities for their staff such as sports, hiking and parties. The staff'sfamily are also invited to understand the company. They expect to develop atotal human relationship with their staff through these activities. An ideal

- 41 -

manager is a person who can get full credit with his staff, and this is animportant objective of managers' education and training, as well as learningsome specific knowledge and skills of management.

From the examination so far, we can summarize the following twopoints. First, major Japanese companies perform long-term and systematiceducation and training for all employees. Second, the main objectives ofeducation and training are not only learning specific knowledge and skills butalso improving employees' moral and human relations. We will examine, in thefollowing section, why Japanese companies can perform such long-term, systema-tic and human relation oriented education and training. This is closelyrelated to the so-called Japanese management system.

2. Japanese Management and Manpower

A great number of studies about the Japanese management system havealready been done both in Japan and abroad. This is mainly because Japanesehigh economic growth in the 1960s and relatively good economic performance incoping with two oil criles in the 1970s attracted strong worldwide interest inher management style.30' The purpose of this section is to suggest thatJapan's management system for manpower iy one of "internal accumulation"rather than of "external procurement".31- In the following section, we willanalyse this point from two aspects of the Japanese style of management: (a)the employment and promotion system; and (b) the wage system.

(a) The Employment and Promotion System

Basic policies of the internal accumulation type of manpower managementare, first to hire capable new graduates, second to educate and train themintensively in a company, and third to keep them in the same company for thewhole period of their working careers. We have already examined the first andsecond point in the previous sections. It is important, however, to rememberthat in hiring new graduates, Japanese companies are concerned about theirgeneral ability and potential rather than specific knowledge and skills, andin training them, special emphasis is put on the improvement of humanrelations as well as teaching vocational knowledge and skills.

The third point is the so-called life-time employment system, whichis widely recognized as one of the basic characterictics of Japanese manage-ment. However, it is important to note that there is no legal obligation inthis system. In other words, life-time employment is merely a custom ofJapanese companies and neither employers nor employees have any obligation oflife-time employment. Employers can dismiss their workers anytime (althoughan announcement is required) and workers can also leave their company any-time. Therefore, there must be some reasons why both employers and employeesin Japanese companies try to keep the life-time employment system.

Let us first examine the case of employees. First of all, life-timeemployment gives stability to a worker's life and he can make a steady careerplan on the basis of the security of his employment. Aged workers, espe-cially, tend to prefer staying in the same company where they have worked.Second, because Japanese companies adopt a seniority wage system, the longer

- 42 -

workers stay in the same company, the higher the salary they can get (we willexamine the details in the next section). Third, in Japan it is very diffi-cult to leave one company and get a better job in another company, becausemost of the companies, especially the large ones, hire only new graduates asregular staff. Fourth, traditional ethics in Japanese society require thatonce one gets a job in a company, one should not easily change to anothercompany.

Employers also have reasons to keep the life-time employmentsystem. First, they can make long-term manpower planning. When they make alarge investment in education and training, it is essential for them to besure that their employees will stay for a long period in the company. Second,by providing many years of education and training, employers can adapt theirworkers to the tradition of the company, and expect high morale and loyalty.Third, it is difficult to recruit skilled and experienced workers from thelabor market outside of the company, since capable workers are trained in acompany and stay there. They are also prudent in hiring workers from othercompanies, since it often causes friction between new and old employees.Keeping harmony among workers is one of the most important roles of manage-ment. Fourth, employers also have traditional ethics that require they shouldnot easily dismiss their workers, since both employers and employees regardtheir company as a kind of family. Employers' paternalism and employees'loyalty are two of the most significant cultural factors of Japanese manage-ment, and the life-time employment system is reinforced by this.

Based on this life-time employment system, employees in a Japanesecompany form an internal labor market inside the company, which is distin-guished from the ordinary external labor market. This internal labor markethas the following characteristics. First, it is a closed system, in whichthere is only one entrance and one exit. Employees enter this market at thebegining of their working careers and exit at the time of their retirement.Second, it is a competitive market, in which every employee is in a race forpromotion. Although seniority and academic qualifications determine theinitial conditions in this market, those in similar age and academic qualifi-cation groups have equal opportunities for promotion. They are very oftentransferred among departments during their working careers, and the companygradually examines their merits and aptitudes. The most capable men among thewhite collar workers, who win the long promotion race in this internal market,become the president or the executives of the company1 Blue collars workersalso have an opportunity for promotion up to foreman. This is called theinternal promotion system. Third, this internal labor market is flexible injob allocation. The company freely transfers its employees in this marketaccording to its needs. This means that as long as the company accumulatesenough human resources, it can flexibly cope with the changing economicsituation by mobilizing its own manpower.

Diagram III-2 summarizes these characteristics mentioned above, andcompares this system with that of external procurement. It is important,however, to note that these characteristics are only tendencies of Japanesecompanies and do not exist in a pure sense. Generally speaking, the larger

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Diagram III-2 : Internal Accumulation Type andExternal Procurement Type

(retirement) (retirement)

1---------'- ,=== ---- ---

<------- ------ ' > -(internal (promotionpromotion (promotion -- > &

& job & company - ------> __ companytransfer) transfer) transfer)

> …-->

>__-___,__> __I-=======> ~ ~~~~~~ _____ ____ >__ _ _

(employment) (employment)

[Internal Accumulation Type] [External Procurement Type]

the company, the more they have these tendencies. We should also note thatthe most important factor of this internal accumulation type of manpowermanagement is to keep the mobility of all employees in a company. This meansthat in Japanese companies, the type of post has a very loose relation withthe worker's qualification. In the case of European or American companies,which have an external procurement type of manpower management, job contentand responsibility are clearly defined together with qualification for theperson who is applying for the post. Therefore, everyone who has thisqualification (both inside and outside the company) can apply for the post,and the company hires the person for this particular job. Workers have to gettheir qualifications at their own expense, say, by going to training school,but if they have the qualifications, they can apply for a post at anycompany. We may say that these companies employ not the worker himself, buthis qualification, namely, his specific vocational knowledge or skills.Therefore, when the post become redundant, the company does not try totransfer the worker into another post, but immediately lays him off.

Japanese companies, however, look at employees' potential and trainthem as flexible manpower at company expense. Since they pay the cost oftheir employees' education and training, when the post become unnecessary,they try to transfer the workers into another post. In other words, Japanesecompanies keep training their workers so that they can mobilize them at anytime in any way. Therefore, in Japanese companies most of the posts do notrequire specific,qualifications, and the job content and responsibility of thepost are not clearly determined. We may say that none of the newly employedgraduates know their specific duties in a company, when they are hired. All

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of them are expected to have the potential to do any type of job, and thecompany trains them to do so. This flexibility of manpower is a strongadvantage of Japanese companies.

(b) The Wage System

The compensation system in Japanese companies is also closelyrelated to their employment system. The compensation system consists of awage system and a fringe benefit system, the former includes basic salary andother allowances. In the following part of this section, we will concentrateon the wage system and examine its characteristics. Table III-9 indicates thecomposition of wages in Japanese companies. As shown in the table, 83.5% ofthe fixed wage is a "basic salary". The basic salary is the most fundamentalpart of the salary, and it is used as a standard to determine other allowancesand benefits. The role of the basic salary in Japanese companies is similarto that of the wage rate in European and American companies.

Table III-9: COMPOSITION OF WAGES (1979)

Yen % %

Fixed wageBasic salary 144,450 (83.5) (89.9)Achievement allowance 3,460 (2.0)Service allowance 7,266 (4.2)Encouragement allowance 15,050 (8.7)Life allowance 1,211 (0.7)

Subtotal 171,437 100

Other Wages 19,435 (10.1)

Total 190,872 (100)

Source: Japan Productivity Center.

There are three types of basic salary in Japanese companies, namely,basic salary based on job classification (SHOKUMUKYU), basic salary based onjob capability (SHOKUNOKYU) and basic salary based on seniority (NENKOKYU).Table III-10 indicates the percentages of companies which adopt these salarytypes.

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Table III-10: TYPES OF BASIC SALARY

Type A (SHOKUMUKYU) 2.9Type B (SHOKUNOKYU) 92.6Type C (NENKOKYU) 11.7Type A & C 4.9Type B & C 64.1Cannot determine 1.9Others 1.9

[note] Type A : basic salary based on job classificationType B : basic salary based on job capabilityType C : basic salary based on seniority

SHOKUMUKYU is the salary which is paid for the job itself. It isassumed that there is a fixed relation between job classification and salarystratification. Therefore, the salary is paid not for the worker but forhis/her job. This type of salary is mainly used in European and Americancompanies, which have an external procurement type of manpower policy. InJapanese companies, however, SHOKUMUKYU is not a popular type of salary asshown in the table. This is mainly because Japanese companies have aninternal accumulation type of manpower policy, and try to keep the flexibilityof their employees. If a worker's salary and his job are tightly linked, itwill be difficult to transfer him from one job to another. In order to freelymobilize all employees, their salary must be determined not by their jobclassification but by other personal factors.

NENKOKYU is one alternative. This basic salary is determined bypersonal factors such as age, years of employment, academic qualification,sex, etc. Employees' salaries increase with little or no relation to theirjob classification or their capability, and among those in the same academicqualification and sex group, the older workers earn the higher salary. We maysay that this is a seniority wage system in a pure sense. However, this typeof salary system has two main problems. First, as the Japanese workers age,the cost of their salaries becomes a heavy financial burden for thecompanies. Second, it is difficult to reflect a worker's merit in his salary,and it may weaken the morale of capable employees. This is why as shown inthe table, only 11.7Z of companies adopt only this type of basic salary.

SHOKUWNOKYU, basic salary based on job capability, is the otheralternative. Job capability means not only an employee's realized capabilityin his present job but also his potential capability for a future job. Thistype of salary enables a company to keep a loose relation between anemployee's salary and his job, and at the same time, to reflect his merit inhis salary. Another advantage of this type of salary is that both the companyand the workers are concerned about education and training, because workerscan expect a higher salary by developing their potential, and the company canaccumulate more capable manpower by providing education and training. How-ever, the most difficult point in this salary type is how to measure a

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worker's potential capability. Although elaborate methods of personnelappraisal have been developed, there is still some risk, because onceemployees feel the appraisal is unfair, their morale is severely distorted.This is why most Japanese companies accept the combination of NENKOKYU andSHOKUNOKYU as shown in Table III-10 (64.1X).

Another important characteristic of the wage system in Japanesecompany is TEIKISHOKYU (yearly salary increase). This means that everyemployee's (both white and blue collar workers) salary is raised every year atthe same time. The rates of increase are determined automatically by theprescribed table, or by appraising individual capability and achievements, orby a combination of these two methods. As shown in Table III-lI, 87% ofJapanese companies adopt this system of yearly salary increase. This yearlysalary increase can be performed both for SHOKUNOKYU and NENKOKYU but not for

Table III-11: PERCENTAGES OF COMPANIES ADOPTINGA SYSTEM OF YEARLY SALARY INCREASE

Size of company Adopting the system Not Totalby no. of workers sub-tot A B A & B adopt

30 - 99 86.2 20.3 27.8 38.2 13.8 100100 - 999 88.6 24.2 20.4 44.0 11.4 1001,000 - 87.2 23.0 17.8 46.3 12.8 100Average 86.9 21.4 25.5 40.0 13.1 100

Notes: A : Determined by personnel appraisal.B : Determined automatically by prescribed table.

Source: Ministry of Labor.

SHOKUMUKYU. As a result of this system, wages among Japanese workers aredifferentiated by their age and length of working years. As shown in TableIII-12, their wages increase constantly until they are fifty five years old,the ordinary retirement age. This is the so-called seniority wage system inJapanese companies. This system has advantages for both workers and thecompany. For workers, this system guarantees the increase of their salaryaccording to their age, and therefore, enables them to meet their needs ateach stage of their life cycle. For companies, this system guarantees the

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Table III-12: WAGE DIFFERENTIALS CLASSIFIED BYAGE AND ACADEMIC QUALIFICATION (1982)

(1,000 yen)

Age White-collar Blue-collarA B C A

Under 17 - 97.018 - 19 111.3 - 108.1 113.620 - 24 133.7 141.7 131.5 131.725 - 29 171.7 172.2 160.4 164.930 - 34 213.2 228.0 187.5 195.535 - 39 254.7 285.1 209.4 221.640 - 44 288.9 355.8 218.5 234.345 - 49 307.6 410.2 219.0 234.150 - 54 317.4 450.0 218.0 228.055 - 59 290.0 424.1 195.3 202.860 - 64 242.4 316.2 156.7 173.8over 65 200.4 270.8 142.0 155.1

Average 243.8 269.8 199.1 183.8

Note : A : Upper secondary school leavers.B : University graduates.C : Lower secondary school leavers.

Source : Ministry of Labor, 1983.

workers' life-time commitment to the company, and it can use this system as anincentive to develop each employee's potential capability.

However, this seniority wage system has been changing recently,mainly because of the increase in cost as the result of workers aging. Someof the companies stop the automatic yearly increase at the middle of theirworkers' careers, say, at the age of forty, or reduce the rate of increase forthe older employees.

3. Workers' Participation and Economic Development

In the previous sections, we analyzed the characteristics ofeducation and training in Japanese companies and their management policies forthe utilization of manpower. The purpose of this section is to examine howJapanese companies have been able to develop Japan's economy in this manage-ment style. Although Japan's economic success can be explained by reasonsother than companies' management policies, (for example, institutional reformsafter World War II, appropriate Government leadership, and favorable inter-national environment), we will concentrate on the utilization of manpower inJapanese companies and in particular, workers' participation.

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We use the term "workers' participation" in a broad sense, whichincludes at least the following three points. First, workers' participationmeans each worker's positive commitment to his/her job. He performs his dutynot only because he has to, but also because he can get self-fulfillmentthrough his job. We can expect the best result from a worker when he activelyinvolves himself in his job. Self-esteem and pride in doing his duty areimportant factors. Second, workers' participation means every worker'svoluntary commitment to the job. Not only white-collar but also blue-collarworkers should actively participate in production and management of thecompany according to their duties. Third, workers' participation includesworkers' cooperation. An employer cannot achieve his aim without the positivecooperation of his employees nor can employees improve their production andworking conditions without their employer's understanding. The more theycooperate, the better results they can get. We may say that participation isthe key to utilize human resources, because it motivates workers and enablesthem to maximize their ability both as individuals and as a group. We may saythat one of the most important factors of the success of Japanese companies isthis workers' participation. In the following part of this section, we willexamine the three aspects of workers' participation, namely, (a) labor partic-ipation in management, (b) suggestion system, and (c) company-wide qualitycontrol. Finally, we will consider some effects of these management policiesand workers' participation on Japanese economic development.

(a) Labor participation in management

Labor participation in management usually includes collectivebargaining, labor-management joint consultation, ownership sharing, profitsharing, and workers' participation in the board of executives. Although itis not our purpose to describe all of these systems, we should note thefollowing points as characteristics of Japanese labor-management relations.

Table III-13: NUMBER OF UNIONS AND THEIR MEMBERS (1975)

No. of Unions No. of Members(one thousand)

(%) (%)

Enterprise unions 65,337 (94.2) 11,360 (91.1)Industrial unions 1,775 (2.6) 682 (5.5)Craft Unions 720 (1.0) 169 (1.4)Others 1,501 (2.2) 259 (2.0)

Total 69,333 (100) 12,470 (100)

Source: Ministry of Labor.

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First, almost all Japanese companies adopt the so-called enterpriseunionism. As shown in Table III-13, 94% of total unions are enterpriseunions. Since all the members of a union are, at the same time, employees ofthe company, the interests of labor and management can be matched relativelyeasily. After the first oil crisis, for instance, Japanese unions acceptedthe relatively lower level of wage increase compared with the higher inflationrate. This is mainly because unions adopted a long-term point of view, andgave priority to the security of employment rather than to the increase inwage. As a result, Japan was able to avoid mass unemployment and recover hereconomy relatively quickly.

Second, the internal promotion system also contributes to laborparticipation in management. In Japanese companies, it is common for a workerto stay in a company first as an employee, then as a leader of the union, andagain become an employee of the company. The post of union leader is consid-ered a good opportunity to learn labor-management relations, and those whohave held the post are usually promoted to management positions. TO unionrepresentative may even become a member of the board of directors.-3

Third, we should also note the decision-making system of Japanesecompanies. Since, as we saw in the previous section, each worker's jobcontent and responsibility are not clearly prescribed in Japanese companies,decision-making is performed collectively involving many workers in thecompany. Under this decision-making system, most of the decision plans arefirst provided by ordinary employees or lower managers. They have severalformal and informal discussions with other managers at the same level whosesectional interest may be related to this decision, and consensus among themis sought. Once they reach consensus, the decision plan is raised to thesenior managers' level. They repeat almost the same process and accumulatetheir ideas and consensus to the plan. In this way, the decision plan goesthrough a hierarchy of the company up to general manager, executives, or thepresident, according to the significance of the decision. Although the finaldecision is taken by the top management, it is the result of many workers'consensus. Especially for lower level workers, this system provides an oppor-tunity to participate in decision-making. Therefore, once a decision has beenadopted, all the workers who are familiar with the decision cooperate and theobjective can be achieved smoothly.

Fourth, labor participation in management is also supported by thecommunity-oriented mental attitude of Japanese workers and managers. Underthe Japanese management system which we have examined so far, both managementand workers begin to feel that they are living in the same community andsharing their life and fortune with each other. They often regard theircompany as a big family and this emotional relationship promotes the sense ofparticipation.

(b) Suggestion System

The suggestion system aims to collect workers' ideas and opinionsabout their job and company, and improve the company's system and produc-tivity. As shown in Table III-14, almost three quarters of all companies havethe suggestion system, and more than 80% of workers are involved in it. Inthe case of large companies, the corresponding percentage is more than 90%.

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Table III-14: SUGGESTION SYSTEM

Size of comp. % of establishments % of workersby No. of Emp. involved involved

5000 - 91.9 94.51000 - 4999 80.9 83.5300 - 999 70.8 73.4100 - 299 66.2 68.5

Total 74.1 82.2

Source: Ministry of Labor, from Inagami, p. 32.

This nationwide suggestion system is coordinated by the Japan Research Asso-ciation for the Suggestion System, which was established in 1958. Suggestionsmainly concern improving work methods, saving materials and energy, improvingthe working enviroment, and updating equipment and machinery.

For employees, the suggestion system provides opportunities torealize their ideas and improve their working conditions. For employers, goodsuggestions lead to increased productivity. They can also expect a raise inworkers' morale, when their suggestion is adopted. Table III-15 indicates thetrend of the suggestion system. We can observe the following points from thistable. First, the total number of suggestions has increased from 3.3 millionin 1973 to 32.2 million in 1981, an almost ten-fold increase in eight years.

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Table III-15: TRENDS OF THE SUGGESTION SYSTEM

1973 1975 1977 1979 1981

No. of comp. 141 189 229 372 465

Total No. of 3,322 4,942 5,748 13,499 32,223suggestions(thousand)

Ave. No. of 23.6 26.1 25.1 36.3 69.3sug. per comp.(thousand)

Ave. No. of 4.5 4.7 5.6 7.2 14.2sug. per empl.

Adoption rate (%) 68.0 72.3 69.3 70.0 70.0

Implementation 92.3 72.5 90.2 93.1 92.6rate (%)

Source: Inagami, 1983, p. 34.

Second, accordingly,-the average number of suggestions per company and peremployee have also increased. Third, on average for this period, 70% of allsuggestions have been adopted, and the implementation rate has reached 88%.

It is also reported that the yearly cost of suggestion activitieswas Y 3.77 million on average based on the data of 301 companies, and totaleconomic benefits derived from the suggestions was estimated at Y 34.18billion. Therefore, the e of return of the suggestion system ([benefit -cost]/cost) reached 29.1,

(c) Company-wide quality control (CWQC)

The most unique system of workers' participation in Japanese compa-nies is "small group activities." It is said tqo more than ten millionworkers are involved in small group activities. - This figures implies thatalmost one fifth of all Japanese workers including all industries organizesmall groups spontaneouly in their workshop. These small group activities areformed on the basis of the Japanese management system and group-orientedcultural background, and support the vitality of the companies and Japan'seconomic development.

Although there are various types of small groups such as recreationcircles, safety circles, suggestion circles, ZD (Zero defects) circles and JK(JISHU KANRI, voluntary control) circles, etc., we will concentrate on QC

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(quality control) circles here, and examine them in relation to CWQC. Qualitycontrol was originally one of the management techniques imported from theUnited States after World War II. However, under the leadership of the Unionof Japanese Scientists and Engineers (JUSE), quality control activities havedeveloped into a unique system in Japanese companies, and nowadays thetechniques of Japanese quality control are exported worldwide including theUnited States, China, Korea, etc. Quality control activities have played oneof the most important roles in Japan's export promotion.

Ishikawa, one of the mosc famous experts of quality control,mentions the following six points as the unique characteristics of Japanesequality control: CWQC, education and training for quality control, qualitycontrol circle, nationwide promotion activities 16 valuation system of qualitycontrol, and utilization of statistical skills.6 We will briefly examinethe first three points in the following.

CWQC means at least the following three points.371 First, everybodyin a company participates in quality control activities. Second, everydepartment of the company must participate in the quality control. Qualitycontrol can be applied not only for the production line, but also any otherdepartment such as planning, sales, personnel management, etc. Sectionalismamong departments must be removed. Third, CWQC aims at total quality controlof all company activities. It controls not only quality of goods, but alsoquality of prices, time, and services, etc.

It is said that quality control starts and ends with education, andeveryone in a company must be educated in CWCQ. This is partly becausequality control is based on statistical analysis of data, and requires thateveryone has a basic knowledge of statistics. However, a more importantreason for education and training is that quality control is one of themanagement philosophies to change the quality of the company itself, andtherefore, systematic and repeated education is essential to understand andimplement this new philosophy. These education and training programs aremainly conducted by the JUSE. Its "basic course" has been held more thansixty times since it was started in 1949. Duration of the course is sixmonths, and in each month there are five days of lectures and case study.Every attendant is required to collect data from his own plant every month,and solve problems by learning basic skills of quality control. Graduates ofthe course organize a QC program in their own company based on JUSE's programwith the assistance of external consult g0sp and disseminate the knowledge andskills to other members of the company._

According to the Fundamentals of Quality Control Circles edited bythe JUSE, a QC circle is defined as "a small group which carries on conti-nuously as a part of company-wide quality control activities, self developmentand mutual development, control and improvement within the workshop, utilizingquality control techniques with all members participating." Aims of QC circleactivities are to contribute to the development and improvement of companies,to create better workshops based on humanism, and to realize the full poten-tial of employees through the development of their ability. As shown in thisdefinition, a QC circle is a small group organized by the spontaneous partic-ipation of all workers in a workshop. As shown in Table III-16, the number of

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QC circles registered in JUSE reached 115,254 and the number of participantsis more than one million in 1980. It is estimated that the number of unregis-tered circles is almost ten times that of registered circles.

Table III-16: REGISTERED NUMBER OF QC CIRCLES

Year No. of QC No. ofcircles participants

1962 231964 1,0511966 7,307 90,8291968 17,416 212,1341970 33,499 388,5431972 51,615 551,6431974 65,477 664,4581976 78,395 774,0121978 94,787 903,4711980 115,254 1,062,759

Source: INAGAMI, 1983, p. 31.

It is remarkable that such a great number of workers are spontaneously formingQC circles. This is mainly because the QC circle aims at self-development andmutual development of workers. Workers participate in the circle not becauseof the direct economic benefit (most of the circles have a meeting before orafter working hours without any payment), but because they can improve humanrelations in a workshop and get self-fulfillment through their job. QCcircles give workers a pride in their job, and develop their potential. It issaid that QC circles bring back the essence of working as a human activity toworkers who have been alienated in the progress of automation. Although thereis some criticism that QC circle activitiel9 ore another way of exploitingworkers, this seems to be from a minority.- As long as small groupactivities such as QC circles are based on workers' spontaneous participation,they will develop further.

Some Effects of Japanese Management Policies

Lastly, let us briefly examine some effects of these manpowermanagement policies in Japan. Apart from economic growth rate and the amountof GDP, we can mention the following points.

First, Japan's rate of unemployment is very low, compared with othercountries. As indicated in Table III-17, Japan's rate of unemployment wasonly 2.4% in 1982, which is the lowest rate in OECD countries. One of themain reasons for this Low rate lies in the internal accumulation type ofmanagement policies such as life-time employment.

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Second, Japan's labor-management relations are relatively stablecompared with other countries. Table III-18 indicates the work-days lost inlabor disputes in selected countries. As shown in the table, the number ofworkdays lost in Japan is the lowest both in total days and days per worker.(One thirty second of the number of workdays lost in the U.S.A. and one fortyfifth of the number in Italy).

Table III-17: RATES OF UNEMPLOYMENT INSELECTED OECD COUNTRIES (X)

1970 1975 1980 1982

Japan 1.1 1.9 2.0 2.4U.S.A. 4.8 8.3 7.0 9.5U.K. 3.1 4.7 6.9 12.7F.R.G. 0.8 3.6 3.0 6.1France 2.4 4.1 6.3 8.0Italy 5.3 5.8 7.4 8.9Canada 5.6 6.9 7.5 10.9

Source: OECD.

Table III-18: INDEX OF WORKDAYS LOST IN LABOR DISPUTES

No. of workdays No. of employees No. of work-lost (average of (1978) days lost per

1978 - 1980) employee

Japan 1.0 1.00 1.0(1,096,000) (38,760,000) (0.028)

U.S.A. 31.9 2.32 13.9U.K. 15.7 0.59 26.5F.R.G 1.5 0.57 2.6France 2.3 0.45 5.1Italy 16.5 0.37 44.4

Note: ( ) indicate real numbers of Japan.Source: The Japan Institute of Labor.

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Third, Japanese companies can cope with technological innovationswithout causing serious problems such as unemployment. This is because inintroducing new technology, Japanese companies can transfer their employeesfrom obsolete posts to new posts by giving them training. Since workers'employment and wages are secured regardless of their current job, they do notobject to the introduction of new technology such as industrial robots. Onthe contrary, they often welcome it, because they know that as long as theyget proper training, they can use this new technology to release them fromhard physical work. According to the Government's investigation, theintroduction of mechatronics machines resulted in surplus labor in 31% ofcompanies, and reduced working hours per person in 25% of companies. However,only 2% of these companies coordinated their employees. In regard to thewages of workers who were transfered, 12% of companies i7 creased their salaryand 87% did not change. Only 1% reduced their salary.-

Fourth, the quality of Japanese products has become remarkably good,and therefore, productivity is increased. Table III-19 shows the datapresented at the US-Japan semiconductor seminar in 1980. From this table, itis obvious that there is a significant difference in quality between Japaneseand American products. Furthermore, quality control leads to reductions inproduction cost, because it decreases the rate of sub-standard articlessignificantly. The increase in quality and decrease in cost has resulted inthe strong competitive power of Japanese companies in an international market.

Table III-19: COMPARISON OF QUALITY BETWEENJAPANESE AND AMERICAN SEMICONDUCTORS

Companies X Y Z

J 1 0 0.01 89.9J 2 0 0.019 87.2J 3 0 0.012 87.2A 1 0.19 0.09 86.1A 2 0.11 0.059 63.3A 3 0.19 0.267 48.1

Notes X: Rate of sub-standard articles at the time of purchase.Y: Rate of trouble after 1,000 hours' usage.Z: Index of the evaluation of quality.J 1, J 2, J 3 are Japanese companies' products.A 1, A 2, A 3 are American companies' products.

Source: KARATSU, 1981, p. 7.

Fifth, .Japan has achieved a relatively egalitarian income distribu-tion, Table III-20 indicates the income distribution in selected countries.As shown in this table, the share of the lowest 20X of people in Japan is

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8.7%, which is the highest rate among the selected coun.;ies (and among allthe other countries for which the data are available),4I and the lowest 40%(lowest 20% and second quintile) is also the highest (21.9%). On the otherhand, the highest 10% of people share only 21.2%, which is the lowest togetherwith Sweden and Finland (also among the world), and even the highest 20% sharethe lowest percentage (36.8%). Although the reasons for this egaLitariandistribution can be explained by many factors such as institutional reformsand tax policies, the Japanese education and wage system are two importantfactors. More than 90% of people go to upper secondary school and the rate ofattendance at university also reaches more than 30%. Although there is wagedifferential between upper secondary leavers and university graduates, the gapis not very big (see Table 1I-20). Furthermore, because of the seniority wagesystem, every worker's salary is gradually increased according to his age.These systems prevent workers' income from differentiating, together withother institutional mechanisms.

Table III-20: INCOME DISTRIBUTION

Lowest Second Third Fourth Highest Highest20% quintile quintile quintile 20% 10%

Japan 8.7 13.2 17.5 23.1 36.8 21.2Canada 3.8 10.7 17.9 25.6 42.0 26.9France 5.3 11.1 16.0 21.8 45.8 30.5F.R.G. 7.9 12.5 17.0 23.1 39.5 24.0U.S.A. 4.6 8.9 14.1 22.1 50.3 33.4Italy 6.2 11.3 15.9 22.7 43.9 28.1U.K. 7.0 11.5 17.0 24.8 39.7 23.4Sweden 7.2 12.8 17.4 25.4 37.2 21.2Finland 6.8 12.8 18.7 24.9 36.8 21.2

Source: World Development Report, 1984.

CHAPTER IV

CONCLUSION

Lessons from Japan's Experience

This concluding chapter examines what present developing countriescan learn from Japan's experience. From the comprehensive range of character-istics and specific conditions of Japanese manpower, eight aspects of herexperience are examined, namely, the historical context, appropriate govern-ment leadership, primary education, institutional network, utilization ofcultural factors, competition and merit system, workers' participation, andhuman oriented management and production.

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Historical Context

Any development is a historical process. Japan's development in theMeiji period was based on that of the Tokugawa period, and the post-war periodon that of the pre-war period. It is difficult to transfer a developmentpolicy which is based on the specific initial condition of Japan to othercountries which do not have the same condition.

For example, when the Meiji government started establishing a newschool system, Japan already had a long tradition of institutional educa-tion. At the beginning of the nineteenth century, there were more than twothousand small schools called TERAKOYA, in which children from the non-samuraiclass learned reading, writing and arithmetic. For children from the samuraiclass special schools called HANKO were provided by each feudal clan. Thnumber of the schools reached 285 in 1871 when the clans were abolished. /

Therefore, when the school system started in the Meiji period, mostJapanese people already had some idea of schools, and understood the impor-tance of education. In fact, many of the primary schools were transformedfrom TERAKOYA, and this was one of the reasons why Japan could achieve almostuniversal compulsory education by the end of the Meiji period (Table II-1).

It is therefore important that a policy be based on each country'sinitial condition. When a new system is transferred, it is more likely tosucceed by utilizing and transforming a traditional system which people arefamiliar with, rather than by introducing a completely new and strange system.

Appropriate Government Leadership

The experience of Japan demonstrates the influence of Government'srole in development. The Meiji government had a strong leadership role inJapanese modernization. However, in the field of education and training, theGovernment developed and encouraged the autonomy of local governments andparticipation of the people, and changed from a centralized plan, which wasexpressed in the Fundamental Code of Education, to a decentralized plan of theOrdinance of Education. Since the local governments were given some degree ofautonomy in education, the central government could transfer most of theeducational cost to them (Tables II-3 and II-16).

More recently, the basic method to promote in-company vocationaltraining in Japan is to give companies and trainees economic incentives suchas financial assistance for in-plant public vocational training, and trainee-ship loans, and training allowances for the unemployed.

Primary Education

Primary education is one of the most important elements in theformation of manpower. It is widely reported that primary education has greatsocio-economic effects on development such as increased 4jlbor productivity,decreased fertility, and improved health and nutrition.4 Although producingselected elites as leaders is necessary for a country's development, it mustbe accompanied by nationwide education. In order to achieve total development

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of a nation (and not just the prosperity of a privileged class), it is essen-tial to mobilize all human resources who receive at least primary education.Japan had only one university until the rate of attendance at primary schoolreached 65%, some thirty years after the Meiji Restoration, and twenty yearslater, when the rate reached almost 100%, Japan had still only four universi-ties (the rate of attendance was about 1%).

Institutional Network

The development of human resources requires not only manpowerplanning and policies but also variety and range of institutions to implementthem, Japan has established various types of institutions on a nationwideLevel. In regard to higher education institutions, there are 62 technicalcolleges, 532 junior colleges, 457 universities and thousands of specialtraining schools (Tables II-6 and II-14), and they produce various types ofmanpower. Some 378 vocational training schools also play important roles tomeet the demand for skilled manpower in local industries. All of theseeducation and training institutions are systematically administered bynational and local governments.

Private enterprises also provide education and training institu-tions. Large companies build their own education and training centers, andsmall and medium companies provide education and training programs as associa-tions. Furthermore, there are many non-government institutions which contri-bute to manpower development, the Japan Productivity Center, for instance, isorganized as a tripartite institution, namely, by labor, management andacademia, and provides education and training programs to promote productivityin Japan.

This nationwide network of education and training institutionsenables the formation and utilization of Japanese manpower.

Utilization of Cultural Factors

Cultural factors always play an important role in the transfer ofmanpower policies. Policies which are alien to a nation's culture will notwork in that country, even if they were effective in the original country. Onthe other hand, policies which are suited to a nation's culture will beaccepted, although possibly needing some adaptation.

Japan can also offer good examples of this adaptation of trans-ferred policies. For instance, when Japanese companies tried to change theirwage system based on seniority (NENKOKYU), they first introduced the wagesystem based on job classification (SHOKUMUKYU) from European and Americancompanies. However, since SHOKUMUKYU did not match the Japanese culture andmanagement style, it was eventually transformed into a Japanese style system,namely, a wage system based on job capability (SHOKUNOKYU). Japanesecompanies succeded in adapting the merits of the new transferred wage systemto the traditional way.

Quality control circles are another example. When the technique ofquality control was transferred from the United States, it was considered that

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quality control was the duty of specialists. However, Japanese companiescombined the technique of quality control with the group-oriented culture ofJapanese workers, and generated a unique system of QC circles. As we examinedin Chapter III-(3)-(c), these QC circles have become very popular in Japan andraised the quality of Japanese products to a high standard in the world.

Competition and Merit System

Competition is a driving force in the development of human resourcesin Japan: the system of competition derives potential from every competitor.Therefore, it is important to build in the mechanism of competition in man-power development such as the education and promotion systems. To promotecompetition, we should especially note the following three points. First,every competitor must be given equal opportunities to compete. Fairness is animportant basis of competition. Second, winners of the competition must begiven appropriate remuneration. The principal of meritocracy is to guaranteethe reward for one's merit and efforts. Perverted equality weakens the moraleof competitors. Third, the result of the competition should not cause greatdifferentials between winners and losers. Once the losers feel that theycannot catch up with the winners, they lose the will to compete.

Japan has utilized this competition and merit system very well. Aswe examined in Chapter II-(3), all students in Japan are urged to compete witheach other in their learning process, and this results in the formation ofwell-educated manpower. Competition is also keen in and among companies. Theinternal promotion system and the SHOKUMUKYU system give employees incentivesto compete during the whole of their working careers. Since more than 99% ofJapanese companies are small and medium size companies (Table III-3), competi-tion among companies is also keen. We can say that the competition and meritsystem play a crucial role in the formation and utilization of Japanese.manpower.

Workers' Participation

Another driving force of the development of human resources comesfrom participation. As discussed in Chapter II-(3), workers' spontaneousparticipation and cooperation in production result in remarkable achieve-ment. Workers' participation should be promoted in various ways so that theirpotential can be maximized. However, it should be noted that Japan's widerange of workers' participation is based on a nationwide high level ofeducation. Because workers have a strong background of general education,they can voluntarily organize their participation activities such as QCcircles. However, a country where the general educational level is not sohigh as in Japan may not be able to achieve the same results from workers'participation. Therefore, it is important to understand the appropriate leveland range of workers' participation in each country.

Human-oriented Management and Production

Finally, the role of human resources in management and productionshould be examined from Japan's experience. Human resources are not only themeans of economic development but also the aim of economic development.

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Physical resources can be mainly exploited and utilized for production.However, human resources are not just a means of production. Workers treatedlike machines will not show high morale, sense of responsibility and sponta-neous participation in production. Human resources are more than physicalresources. They have infinite potential to develop themselves, and Japanesemanagement focuses on this point of human resources.

Therefore, general education is important as well as training.Although there is no clear distinction, training usually includes the acquisi-tion of specific skills related to one's occupation, and education the devel-opment of more general skills. Japanese companies always use the term educa-tion (KYOIKU) together with training (KUNREN), such as on-the-job educationand training, industrial education and training. This is because they areconcerned about not only the improvement of workers' skills but also the totaldevelopment of their potential.

Japan's human oriented management and production based on a highlevel of school education result in the full utilization of human resourcesand economic development.

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FOOTNOTES

[1] This system is similar to that of present socialist countries such asChina or USSR.

[2] He wrote several books about Japan and his achievements in the College.See H. Dyer, DAI NIPPON, 1905.

[3] Miyoshi points out the following five reasons why the College succeded inproducing outstanding manpower: (1) As an environmental condition, therewas no tradition of industrial education in Japan and the new system wasaccepted without any objection. (2) As a political condition, the MeijiCovernment totally supported the College in its finance and administra-tion. (3) As a managerial condition, Dyer had an excellent vision andplan of the College. (4) As an educational condition, there were manytalented and cooperative teachers. (5) As a learning condition, studentswere intelligent and industrious. See Miyoshi, 1983, p. 17.

[4] Miyoshi, Meiji no Enginia KYoiku, 1983, p. 9.

[5] Passin, Society and Education in Japan, 1965, p. 95. For example, theministry paid Y 660 per month to Dyer, twenty five years old, whenJapanese ministers received Y 500 for their salary.

[6] For example, the University of Tokyo, which was established in 1877 wasthe only university in Japan until 1897 when Kyoto University was built.

[7] Extracted from Passin, op. cit. pp. 210 - 211.

[8] Dore explains the reason why it was possible in Meiji Japan from theviewpoint of Japanese class structure and historical background. SeeDore, 1965, chapter 10.

[9] S. Sumeragi, Nihon Kyoiku Seido no Seikaku, 1970, p. 95 and Passin, op.cit., p. 73.

[10] Passin, op. cit., p. 8.

[11] Kimura, Shokugyo Kyoiku no Kotokyoikuka eno Kizashi, in Miyach & Kurauchi(ed), Koza Gendai Gijutsu to Kyoiku Dai 4-Kan, ShokugYo Kyoiku, 1975.

[12] World Bank, World Development Report 1984.

[13] In regard to technical education in lower secondary schools, seeK. Soejima, in The Japanese Commission for UNESCO (ed), Technical andTechnological Education in Japan, 1972.

[14] Ministry of Education, Monbusho, 1981, p. 24.

[15] M. Shimosaka, in The Japanese Commission for UNESCO (ed), op. cit.

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[16] In regard to miscellaneous schools, see S. Kurauchi, in Miyachi &Kurauchi (ed), op. cit.

[171 Kimura, op. cit.

[18] R.Dore, The Diploma Disease, 1976, p. 49.

[19] OECD, Review of National Policies for Ecucation: Japan, 1971.

[20] We will concentrate on the contemporary period. In regard to the in-company education and training since the Meiji period, see Levine andKawada, Human Resources in Japanese Industrial Development, 1980.

[21] The concrete meaning of vocational guidance in Japan to assist theunemployed workers to acquire skills by providing vocational training forthem.

[22] See Ishikawa, Japanese Industrial Relations Series: Vocational Training,1981, p. 15, for details.

[23] Ministry of Labor (ed.), Rodo Gyosei Yoran, 1982, pp. 337-338.

[24] The same source as Table III-3.

[25] For example, Nihon Zoki Seiyaku Ltd. See Nihon Kogyo Ginko Chusho KigyoSenta, Chuken Kigyo no Jinzai Ikusei, 1978, p. 53.

[26] See Small and Medium Enterprises Agency, Chusho Kigyo Hakusho, 1981, p. 314.

[27] Sumiya & Koga, Nihon Shokugyo Kunren Hattenshi: Sengo-hen 1978, p. 336.

[28] Daikure Ltd. See Nihon Kogyo Ginko Chusho Kigyo Centa, ibid, p. 139.

[29] Matsushita Tsushin Kogyo Ltd. See Nihon Kogyo Ginko Chosho Kigyo Senta,ibid, p. 229.

[30] For example, Levine, Industrial Relations in Postwar Japan, 1958; Cole,Japanese Blue Collar: the Changing Tradition, 1971; Dore, BritishFactory - Japanese Factory: the Origins of National Diversity inIndustrial Relations, 1974; Pascale & Atbos, The Art of JapaneseManagement, 1981; Ouch, Theory Z: How American Business can meet theJapanese Challenge, 1981; Schonberger, Manufacturing Techniques: NineHidden Lessons in Simplicity, 1982.

[31] I owe the concept of "internal accumulation type" to Tanaka, Shogai KoyoKakumei, 1979.

[32] It should be noted that in European and American companies, a foreman isprovided among white collar workers.

- 63 -

[33] For example, Sankei Newspaper made an agreement to grant the union theright to send its president to the Board of Directors and to have a sayon personnel appoint-ments concerning directors in charge of laborproblems. See Japan Institute of Labor, Japanese Industrial RelationsSeries No.2: Labor Unions and Labor-management Relations, 1979.

[34] Inagami, Japanese Industrial Relations Series No. 11: Labor-managementCommunication at the Workshop Level, 1983.

[35] Ueda (ed.), Shoshudan Katsudo Suishin Manyual, 1982.

[36] Ishikawa, Nihonteki Hinhitsu Kanri, 1981, pp. 52-53.

[37] ibid. p. 128.

[38] In regard to in-company education for quality controle, see Nikkagiren,Hinhitsu Kanri Vol. 32 No.7, 1981 and Hinhitsu Kanro Vol.33 No. 10, 1982.

[39] For example, Mukaigasa & Togita (ed,), Kojochosa: Kyodai Kojo to RodoshaKaikyu, 1980.

[40] Small and Medium Enterprise Agency, Chusho Hakusho, 1983, pp. 294-295.

[41] See World Bank, World Development Report 1984, pp. 272-273 for detail.

[42] Yakura, Gakureki Shakai, 1978, pp. 36-37.

[43] For example, see Colclough, Primary Schooling and Economic Development:A Review of the Evidence, 1980.

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World Bank EducationWadi D. Haddad, coordinating

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technical assistance agency, lending Stock No. WP 0504. $3.Human Resources Planning in agency), and the role of manpowerthe Republic of Korea: analysis planning in developing coun- Worker-Peasant Education inImproving Technical Education tries. Contends that forcing all man- the People's Republic of China

and Vocational Trainingpower questions into any single ana- tePol' eulco hnandVoctonLee Triiglytical framework results in low-quality Nat J. CollettaKye-Woo Lee analysis and low-quality educational Staff Working Paper No. 527. 7982. 94Provides a basis for human resources investments. Cites a need for continu- pages.planning during a period of far-reach- ity of manpower analysis through the ISBN 0-8213-0050-4. Stock No. WP 0527.ing structural change. Focuses on labor development of a planning methodol- $3.market problems and their solution ogy. Suggests that such analysisthrough institutional linkages between should go beyond identifying and pre- Prices subject to change without noticeformal education and vocational train- paring specific education projects. and may vary by country.

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